Summary of the Third Quarter Compared with the Second Quarter
- Net rental income increased in the third quarter to EUR 27.3
million (EUR 25.8 million in Q2)
- Citycon's earnings per share came to EUR 0.12 (EUR 0.70). Earnings
per share exclusive of changes in fair value remained the same at EUR
0.04 (EUR 0.04).
- The fair value of the investment properties increased by EUR 21.1
million (EUR 160.1 million) to EUR 2,191.2 million (EUR 1,799.2
million), mainly due to improved net rental income and successful
redevelopment projects.
- During the period, Citycon acquired Iso Omena shopping centre in
Espoo. To finance the transaction, Citycon signed a bridge financing
facility of EUR 300 million with a Nordic banking group and executed
a rights issue for total proceeds of EUR 99 million between 19
September and 3 October. The proceeds of the rights issue were used
to repay a part of the bridge financing facility.
- Financial expenses increased due to higher level of interest
bearing debt and a negative non-cash valuation result for the quarter
of EUR -1,4 million (0.1 million) relating to interest rate
derivative contracts, which was due to reduction of long-term
interest rates during the quarter. The year-to-date average interest
rate rose only by 0.01 per cent during third quarter.
- The acquisition of shopping centre Magistral in Tallinn was
completed on 16 July 2007.
- As of the beginning of July, Citycon belongs to large-cap companies
on the OMX Nordic Exchange.
Key Figures
Q3/ Q3/ Q2/ Q1-3/ Q1-3/ Change, 1-12/
2007 2006 2007 2007 2006 % (1 2006
Turnover, EUR
million 38.0 31.3 35.9 108.1 86.4 25.2% 119.4
Net rental
income, EUR
million 27.3 21.6 25.8 76.3 60.6 25.9% 82.8
Operating profit,
EUR million 44.3 45.4 181.6 276.2 154.0 79.4% 196.5
% of turnover 116.7 144.8 505.3 255.5 178.4 - 164.6
Profit before
taxes, EUR
million 31.0 36.1 171.6 243.5 131.9 84.7% 165.6
Profit
attributable
to parent
company
shareholders,
EUR million 23.4 27.5 134.6 191.0 99.9 91.1% 124.9
Earnings per
share (basic),
EUR 0.12 0.17 0.70 1.01 0.64 59.0% 0.78
Earnings per
share (diluted),
EUR (EPRA
EPS) 0.11 0.15 0.62 0.91 0.62 46.6% 0.74
Earnings per
share (basic),
excluding the
effects of
changes in fair
value, gains on
sale and other
extraordinary
items, EUR 0.04 0.05 0.04 0.12 0.15 -23.9% 0.20
Net cash from
operating
activities per
share, EUR 0.03 0.04 0.06 0.14 0.14 1.9% 0.20
Fair market
value of
investment
properties, EUR
million 1,799.2 2,191.2 1,404.5 56.0% 1,447.9
Equity per share,
EUR (2 4.52 3.21 40.8% 3.38
Net asset value
(EPRA NAV)
per share, EUR
(2, 3 4.94 3.42 44.3% 3.61
Adjusted net
assets
(EPRA NNNAV) (2 4.40 3.15 39.8% 3.22
Equity ratio, % 41.2 36.2 - 39.1
Gearing, % 122.3 156.9 - 136.6
Net
interest-bearing
debt
(fair market
value), EUR
million 1,184.3 878.2 34.9% 811.2
Net rental yield,
% (4 6.1 7.5 - 7.1
Occupancy rate, % 96.3 96.7 - 97.1
Personnel (at end
of period) 95 70 35.7% 73
1) Change % is calculated from exact figures and refers to the change
between Q1-Q3/2006 and Q1-Q3/2007.
2) The funds received from the rights issue by 30 September 2007 (EUR
51.2 million) and the corresponding number of shares have not been
taken into account in per share ratio calculations.
3) The calculation on NAV has been modified to comply with EPRA
definitions (previously deferred tax was deducted).
4) Includes the lots for development projects.
Summary of the Reporting Period 1 January-30 September 2007
- Turnover increased by 25.2 per cent, to EUR 108.1 million
(Q1-Q3/2006: EUR 86.4 million), due mainly to property acquisitions
resulting in an increase in leasable premises.
- Profit before taxes amounted to EUR 243.5 million (EUR 131.9
million), including a EUR 212.7 million (EUR 97.0 million) increase
in the fair value of investment properties.
- Citycon's net rental income increased by 25.9 per cent in the
reporting period, to EUR 76.3 million (EUR 60.6 million). Net rental
income for like-for-like properties rose by 9.1 per cent.
- Earnings per share were EUR 1.01 (EUR 0.64).
- Earnings per share (basic), excluding the effects of changes in
fair value, gains on sale and other extraordinary items were EUR 0.12
(EUR 0.15) The reduction was mainly due to increase in net financial
expenses, increased development activities and costs related to
expanded business operations, divestment of non-core properties and
higher number of shares.
- Net cash flow from operating activities per share amounted to EUR
0.14 (EUR 0.14).
- Net asset value per share (EPRA NAV) grew to EUR 4.94 (EUR 3.42).
- The equity ratio was 41.2 per cent (36.2 %).
- According to an external appraiser, the average net yield
requirement for investment properties was 5.7 per cent at the end of
the reporting period.
- In addition to Iso Omena and Magistral referred to above,
acquisitions during the period included Tumba Centrum, Strömpilen and
Länken in Sweden. More details on the acquisitions during the period
are available in the table Property Acquisitions.
- In February, the company carried out a directed share issue worth
EUR 133.8 million by issuing 25,000,000 new shares.
- During the period, the company decided to initiate development
projects in Estonia and Sweden for an estimated total value of EUR
178 million. Lippulaiva shopping centre development project in Espoo
will now be continued according to plan as the zoning appeal
regarding the shopping centre's expansion was dismissed by the
Supreme Administrative Court.
CEO Petri Olkinuora:"Citycon continued to implement its growth strategy through
continuous redevelopment of its properties and proactive management
of its retail properties, reporting strong growth in like-for-like
net rental income in the reporting period, and improved occupancy
rate compared to the previous quarter. For its long-term success, the
company perceives cash flow as a key measure.
During the reporting period, Citycon acquired shopping centre Iso
Omena in Espoo. Iso Omena is a first-class centre with further
opportunities for expansion and refurbishment. Iso Omena is located
in the affluent western part of the Helsinki Metropolitan Area, where
the company from previously holds several retail properties. The
acquisition offers Citycon a unique opportunity to develop the area's
shopping centres as a whole, and to increase the company's market
share in the growing metropolitan retail trade.
In addition to these major acquisitions, the focus of Citycon's
strategy is on the company's existing shopping centre portfolio and
its continuous development and redevelopment. During the reporting
period, development and redevelopment projects progressed according
to plan in Estonia, Sweden and Finland. The company aims to make its
shopping centres more attractive and pleasant to visit.
I would also like to take an opportunity and thank our shareholders
for the support of the rights issue that was fully subscribed for."
Business Environment
The economic growth continued and the retail sector maintained its
strong growth in all of Citycon's countries of operation. In the
third quarter of 2007, demand for retail premises was good in
Citycon's operating regions in Finland, Sweden and the Baltic
countries, while occupancy rates remained high.
Demand for retail properties also remained strong. Since competition
for offered investment properties is tough, yield requirements for
properties have fallen and property prices have risen.
In the reporting period, uncertainty increased in the financial
market, originally due to problems in mortgage -related financial
markets in the US. Until now, however, this has not had a significant
impact on availability of financing or the credit margins paid by the
company.
Business and Property Portfolio Summary
Citycon is a real estate company specialised in shopping centres and
other large retail units, and operating in Finland, Sweden and the
Baltic countries. In Finland, Citycon is the market leader in
shopping centre business, while in Sweden it is one of the
fastest-growing operators. The company has established a firm
foothold in the Baltic countries.
Citycon aims to continue its responsible growth strategy by expanding
its retail property portfolio in selected markets and by developing
and redeveloping its properties into entities that serve the needs of
retail even better. The company's preferred acquisitions are shopping
centres that offer redevelopment and/or refurbishment opportunities,
whose net rental income can be increased with active retail property
management. Thanks to its careful market research and good local
knowledge, Citycon has been able to acquire some of the most
interesting shopping centres in the major growth centres of its
countries of operation. Citycon's new investments are focused on
areas where the population and its purchasing power can be expected
to grow.
At the end of the reporting period, Citycon owned 32 (26) shopping
centres and 53 (52) other retail units. Of the shopping centres, 21
(19) were located in Finland, eight (5) in Sweden and three (2) in
the Baltic countries.
The market value of the company's overall property portfolio totalled
EUR 2,191.2 million, of which Finnish properties accounted for 71.0
per cent (70.3%), Swedish properties for 24.0 per cent (23.9%) and
Baltic ones for 5.0 per cent (5.8%). The gross leasable area at the
end of the period was 906,410 square metres.
Changes in Fair Value of Investment Properties
Citycon measures its investment property at fair value, under the IAS
40 standard, according to which changes in investment properties'
fair value are recognised through profit or loss. The valuation of
investment properties is assessed in accordance with International
Valuation Standards (IVS) at least once a year by on external
valuation professional. In 2007, the valuations by external
appraisers are conducted quarterly, due to active market conditions.
For this interim report, Citycon's property portfolio was valued for
the second time by Realia Management Oy, a part of the Realia Group.
Realia Management Oy works in association with the world's leading
provider of real estate services, the international company CB
Richard Ellis. A summary of Property Valuation Statement on the
September-end status, prepared by Realia Management Oy, can be found
at www.citycon.fi.
During the reporting period, the fair value of Citycon's property
portfolio rose by EUR 212.7 million as a result of development and
redevelopment projects, and changes in general market conditions and
the leasing business. The period saw a total value increase of EUR
222.3 million and a total value decrease of EUR 9.6 million.
The average net yield requirement defined by Realia Management Oy for
Citycon's property portfolio decreased to 5.7 per cent. The change in
yield requirement was due mainly to the very active property market.
Lease Portfolio and Occupancy Rate
At the end of the period, Citycon had a total of 3,730 (3,060)
leases. The average length of the lease agreements was 2.8 (2.8)
years. The period-end occupancy rate for Citycon's property portfolio
was 96.3 per cent (96.7%), and net rental yield was 6.1 per cent
(7.5%) The occupancy rate reduced slightly compared to December 2006,
due to an increase in the number of premises temporarily vacated due
to redevelopment projects.
The company's net rental income grew by 25.9 per cent to EUR 76.3
million. The leasable area rose by 23.5 per cent to 906,410 square
metres. Net rental income for like-for-like properties grew by 9.1
per cent. Like-for-like properties are properties held by Citycon
throughout the 24-month reference period, excluding properties under
development and expansion as well as lots. In the reporting period,
all of Citycon's like-for-like properties were located in Finland.
The calculation method for net yield and standing (like-for-like)
investments is based on guidelines issued by the KTI Institute for
Real Estate Economics and the Investment Property Databank (IPD).
Lease Portfolio Summary
Q3/ Q3/ Q2/ Q1-3/ Q1-3/ Change, 1-12/
2007 2006 2007 2007 2006 % 2006
Number of
leases started
during the
period 112 66 122 348 267 30.3 369
Total area of
leases started,
sq.m. 28,884 9,492 28,745 75,589 58,478 29.3 73,300
Occupancy rate
at the period-end, % 95.8 96.3 96.7 -0.4 97.1
Average length of
leases at
period-end, years 2.9 2.8 2.8 0.0 2.9
Property Acquisition Summary
The focus of Citycon's business is on the continuous development of
its existing shopping centres and other retail properties. However,
the company is always actively seeking new acquisition opportunities
in Finland, Sweden and the Baltic region.
The total value of acquisitions made in the reporting period was EUR
373.2 million in Finland (EUR 127.2 million), EUR 129.0 million in
Sweden (EUR 220.8 million) and EUR 16.3 million in the Baltic
countries (EUR 16.2 million).
The following property acquisitions were completed during the period:
Iso Omena Shopping Centre
Citycon acquired shopping centre Iso Omena on 14 September 2007.
Built in 2001, Iso Omena is Finland's fifth-largest modern shopping
centre (by area). Its leasable floor area totals 61,300 square
metres, of which retail premises account for approx. 49,000 square
metres. The shopping centre can be expanded further by some 7,000
square metres. Iso Omena offers a wide range of services, with
approximately 120 shops, cafés and restaurants, and the hypermarkets
Citymarket and Prisma as anchor tenants. Grocery sales account for
more than 60 per cent of the shopping centre's sales including the
hypermarket sales.
Iso Omena in Summary
+-----------------------------------------------------+
| Leasable area, m2 | 61,300 |
|-------------------------------------+---------------|
| Retail area, m2 | 49,000 |
|-------------------------------------+---------------|
| Unused building right, m2 (approx.) | 7,000 |
|-------------------------------------+---------------|
| No. of shops, cafés and restaurants | more than 120 |
|-------------------------------------+---------------|
| Visitors in 2006, millions | 8.4 |
|-------------------------------------+---------------|
| Sales in 2006, EUR million | 195 |
|-------------------------------------+---------------|
| No. of parking spaces (86% indoors) | 2,200 |
|-------------------------------------+---------------|
| Occupancy rate, % | 98.5 |
+-----------------------------------------------------+
Iso Omena is located in the high purchasing power area of southern
Espoo, some 13 km from the centre of Helsinki, at the junction of the
Länsiväylä and Ring II motorways. The excellent transport connections
of the area will improve further with the extension of the
underground network to Espoo, with Matinkylä Metro station planned
for construction right next to the shopping centre. There are nearly
150,000 people in the shopping centre's catchment area.
Iso Omena's acquisition cost was EUR 329 million, which corresponds
to an initial net yield of 4.5 per cent at the time of purchase.
MREC Espoon Asemakuja 2
In late August, Citycon acquired all the shares in mutual real estate
company Kiinteistö Oy Espoon Asemakuja 2 for approximately EUR 11
million of which Citycon has paid EUR 9 million. The company owns the
office property adjacent to shopping centre Espoontori. The
acquisition paves the way for expansion and development of the
shopping centre, assuming that the proposed change in city plan is
approved. It was agreed that the purchase price would be lowered by a
maximum of EUR 2 million if the proposed change in city plan was
rejected.
Myllypuro Retail Centre
Citycon Oyj acquired a majority holding in the Myllypuro retail
centre in eastern Helsinki through share transactions concluded
during the reporting period. The transactions were associated with a
more extensive refurbishment and development project in and around
the Myllypuro retail centre in cooperation with the City of Helsinki.
Magistral Shopping Centre
Citycon acquired shopping centre Magistral on 16 July 2007 for EUR
16.5 million, which corresponds to initial net yield of 6.5 per cent.
Magistral is in Tallinn, in the district of Mustamäe. With its 64,000
inhabitants, this is Tallinn's second-largest district, located
approximately five kilometres from the centre. The shopping centre
was built in 2000 and has a leasable floor area of 9,450 square
metres with an occupancy rate of 100%. The centre has significant
redevelopment and expansion potential. The deal also included the
purchase of approximately 8,400 square metres of building right for
EUR 2 million, on the condition that the pending change in city plan
is approved. This is Citycon's second shopping centre in Estonia and
its third in the Baltic region overall.
Shopping Centre Strömpilen and Retail Centre Länken
Citycon acquired 75% of shopping centre Strömpilen and retail centre
Länken in Umeå for EUR 52.5 million in May. The investment's initial
net yield on the purchase price stood at 5.5 per cent.
Property Acquisitions in the Reporting Period 1)
Acquisition Leasable
cost (EUR floor area
Property Location million) 2) (m2) Date
Tumba Centrum Botkyrka, Sweden 59.4 31,000 31 Jan. 2007
Lahden Hansa Lahti, Finland 17.3 11,000 28 Feb. 2007
Strömpilen & 25,000 &
Länken 3) Umeå, Sweden 52.5 7,200 25 May 2007
Myllypuro Summer 2007
Retail Centre Helsinki, Finland 2.7 4,000 4)
Magistral Tallinn, Estonia 16.5 5) 9,500 16 Jul. 2007
Espoon
Asemakuja Espoo, Finland 11 5) 6,300 31 Aug. 2007
Iso Omena Espoo, Finland 329 5) 61,300 14 Sep. 2007
1) Includes investments exceeding EUR 1 million in value.
2) Acquisition prices quoted as debt-free prices including
transaction costs, according to the exchange rate of the acquisition
date.
3) Citycon acquired 75% of the properties.
4) Includes several deals.
5) Debt-free acquisition price before adjustment.
Development and Redevelopment Projects
Maintaining its properties as attractive and dynamic centres for
shopping for both customers and lessees is the key element in
Citycon's business. The company aims to increase the long-term cash
flow and return from its retail properties through development
projects. In the short term, however, such projects may weaken
returns from some properties, as part of the retail premises have to
be temporarily vacated for refurbishment and this affects the rental
income.
The table below shows a list of the most significant development
projects in progress, as decided by the Board of Directors. In
addition, Citycon is planning and preparing a number of other
development and redevelopment projects. More information on planned
projects can be found in the management presentations and the Annual
Report, available on Citycon's website at www.citycon.fi.
The capital expenditure during the period relating to all development
projects amounted to EUR 23.3 million in Finland, EUR 7.8 million in
Sweden and EUR 9.7 million in the Baltic Countries.
Development Projects in Progress
Actual
gross
expenditure
Estimated up to 30
total cost Sep. 2007 Estimated
(EUR (EUR year of
Property Location million) million) completion
Lippulaiva Espoo, Finland 60-70 1) 8.7 2008
Trio Lahti, Finland 50.5 10.4 2009
Lentola Kangasala, Finland 16.6 0.0 2007
Torikeskus Seinäjoki, Finland 4.0 2.1 2008
Åkersberga Österåker, Sweden 27 2) 4.5 2009
9.7
Liljeholmen Stockholm, Sweden 110 2009
Rocca al Mare Tallinn, Estonia 68 3) 9.5 2010
1) Both planned development stages are included in the figure.
2) Citycon owns 75 per cent of Åkersberga Shopping Centre. The
estimated total value of the redevelopment project is EUR 40 million.
3) All three planned stages are included in the figure.
Completed and Partially Completed Development Projects
Actual gross
expenditure
Estimated up to 30
total cost Sept. 2007 Estimated
(EUR (EUR year of
Property Location million) million) completion
Duo Tampere, Finland 27.3 24.3 2007
Lillinkulma Kaarina, Finland 8.2 10.91) Completed
1) Includes stages 1 and 2. Stage 2 was completed earlier than
anticipated.
An appeal regarding the Lippulaiva development project in Espoo was
dismissed in the Supreme Administrative Court on 11 September 2007,
and the shopping centre's expansion continues according to plan.
Completion of the first development stage of shopping centre Trio in
Lahti is scheduled for November 2007, and the project is progressing
as planned. The new retail centre in Lentola, Kangasala is to be
completed and transferred to Citycon's ownership by year-end.
An extension to shopping centre Duo in Hervanta, Tampere was
completed in April. The number of customers in the first week after
opening exceeded expectations at 80,000 visitors, and has remained
high since then. The project was completed on schedule, and the
refurbishment of the old part of the shopping centre will be complete
by Christmas 2007.
A food court will open at Myyrmanni in Vantaa in 2007, doubling the
number of the shopping centre's cafés and restaurants. The project is
worth approximately EUR 2 million. Citycon is redeveloping a property
it owns in the centre of the town of Salo into a shopping centre. The
investment amounts to approximately EUR 1.8 million and the centre
will be open by Christmas 2007.
Completion of the Åkersberga shopping centre development and
redevelopment project has been delayed due to changes to the plans
arising from a dispute with one of the centre's tenants. The new
development and expansion plan will be completed in the autumn of
2007.
The company's most significant development project is the
construction of a new shopping centre in Liljeholmen, Stockholm. The
project has progressed according to plan. Currently the constructor
is quarrying underground premises and renovating the existing
building. The new shopping centre is expected to open in
October/November 2009.
Expansion work began at shopping centre Rocca al Mare in Tallinn in
summer 2007. The first stage of the redevelopment project is
scheduled for completion next summer, and the next stage is currently
being planned.
Business Units
Since the end of 2006, Citycon's business is divided into three
business units: Finland, Sweden and the Baltic Countries. These are
further divided into business areas Retail Properties and Property
Development.
Finland
Citycon leads the Finnish market in the shopping centre business. The
company's net rental income grew by 5.6 per cent to EUR 54.7 million.
Net rental income for like-for-like properties rose by 9.1 per cent.
The business unit accounted for 71.7 per cent of the company's total
net rental income.
Rolling twelve-month occupancy cost ratio for like-for-like
properties was 8.5 per cent (8.3%). The occupancy cost ratio is
calculated as the share of net rent and potential service charges
paid by a tenant to Citycon out of the tenant's sales excluding VAT.
The VAT percentage is an estimate.
Lease Portfolio Summary, Finland
Q3 Q3 Q2 Q1-3 Q1-3
2007 2006 2007 2007 2006 Change -% 2006
Number of leases
started during
the period 84 57 101 291 246 18.3 321
Total area of
leases started,
sq.m. 14,510 8,945 24,350 55,760 54,830 1.7 66,500
Occupancy rate
at end of the
period , % 95.9 95.9 96.6 -0.7 97.2
Average length of
lease portfolio
at the end of the
period, year 3.4 3.1 3.1 0.0 3.1
Financial Performance, Finland
Q3 Q3 Q2 Q1-3 Q1-3
2007 2006 2007 2007 2006 Change -% 2006
Gross rental
income, EUR
million 24.6 24.1 23.7 71.6 69.8 2.7 93.1
Turnover, EUR
million 25.5 24.7 24.7 74.1 71.8 3.2 95.8
Net rental
income, EUR
million 18.9 17.7 18.2 54.7 51.8 5.6 68.8
Operating profit,
EUR million 33.9 42.6 137.1 201.2 145.8 38.0 176.1
Net fair value
gains on
investment
property, EUR
million 16.2 20.7 120.3 150.5 91.8 63.9 104.8
Capital
expenditure,
EUR million 353.2 87.2 20.5 396.5 147.1 169.6 152.8
Fair market value
of investment
properties, EUR
million 1,046.6 1,555.5 988.0 57.4 1,009.7
Net rental yield,
% (1 7.0 6.6 7.9 - 7.6
Net rental yield,
like-for-like
properties, % 7.7 7.5 8.1 - 7.9
1) Includes the lots for development projects
Acquisitions made during the reporting period in Finland are listed
above under Property Acquisitions. Finnish development projects are
listed above under Development Projects.
Sweden
Citycon has achieved a substantial position in the Swedish shopping
centre market and has 8 (5) shopping centres and 7 (6) other retail
properties in Sweden, located in Greater Stockholm, Greater
Gothenburg and Umeå. The company's net rental income from Swedish
operations improved by 207.5 per cent to EUR 17.0 million in the
reporting period, and the business unit's net rental income accounted
for 22.2 per cent of Citycon's total net rental income.
Lease Portfolio Summary, Sweden
Q3 Q3 Q2 Q1-3 Q1-3
2007 2006 2007 2007 2006 Change -% 2006
Number of
leases started
during the
period 18 2 15 36 5 620.0 32
Total area of
leases started,
sq.m. 12,213 149 4,138 16,621 748 2,122.1 3,900
Occupancy rate
at end of the period ,% 95.0 96.9 96.4 0.5 96.3
Average length of lease
portfolio at the end of
the
period, year 1.8 2.0 2.0 0.0 2.2
Financial Performance, Sweden
Q3 Q3 Q2 Q1-3 Q1-3
2007 2006 2007 2007 2006 Change -% 2006
Gross rental
income, EUR
million 9.7 4.5 8.4 26.0 9.3 178.5 15.9
Turnover, EUR
million 10.1 4.8 9.3 28.0 10.2 175.5 17.3
Net rental
income, EUR
million 6.5 2.7 6.0 17.0 5.5 207.5 9.3
Operating
profit, EUR
million 7.6 1.5 40.6 67.0 4.9 - 16.8
Net fair value
gains on
investment
property, EUR
million 2.3 -0.7 35.5 52.9 0.4 - 8.7
Capital
expenditure,
EUR million 3.0 187.8 72.2 136.9 226.0 -39.4 267.2
Fair market
value of
investment
properties, EUR
million 414.8 526.4 335.5 56.9 354.8
Net rental yield, % (1 4.6 4.8 5.0 - 5.1
1) Includes the lots for development projects
Acquisitions made during the reporting period in Sweden are listed
above under Property Acquisitions. Swedish development projects are
listed above under Development Projects.
Baltic Countries
At the end of the reporting period, Citycon owned three shopping
centres in the Baltic countries: Rocca al Mare and Magistral in
Tallinn, Estonia and Mandarinas in Vilnius, Lithuania. Due to the
limited size of the Baltic market and the limited availability of
suitable properties, Citycon has been cautious with investments in
the area. However, the company is continuously looking for potential
investment opportunities in the region. Net rental income increased
by 34.1 per cent to EUR 4.6 million in the Baltic region. The
business unit accounted for 6.0 per cent of the company's total net
rental income.
Lease Portfolio Summary, Baltic Countries
Q3 Q3 Q2 Q1-3 Q1-3 Change
2007 2006 2007 2007 2006 -% 2006
Number of
leases started
during the
period 10 7 6 21 16 31.3 16
Total area of
leases started,
sq.m. 2,161 398 257 3,208 2,900 10.6 2,900
Occupancy rate
at end of the period ,% 99.9 100.0 100.0 0.0 100.0
Average length of lease
portfolio at the end of the
period, year 3.0 3.2 3.4 -5.9 3.3
Financial Performance, Baltic Countries
Q3 Q3 Q2 Q1-3 Q1-3 Change
2007 2006 2007 2007 2006 -% 2006
Gross rental
income, EUR
million 2.1 2.1 1.9 5.6 4.3 28.0 6.1
Turnover, EUR
million 2.3 1.7 1.9 6.0 4.4 37.0 6.2
Net rental
income, EUR
million 1.8 1.3 1.4 4.6 3.4 34.1 4.8
Operating
profit, EUR
million 4.2 3.7 5.6 13.3 8.6 53.9 10.9
Net fair value
gains on
investment
property, EUR
million 2.5 2.4 4.3 9.3 5.5 68.0 6.6
Capital
expenditure,
EUR million 22.2 0.1 3.6 26.1 16.2 60.6 16.2
Fair market value of
investment properties, EUR
million 85.6 109.3 81.0 35.0 83.3
Net rental yield, % (1 6.6 6.4 6.7 - 6.7
1) Includes the lots for development projects
The acquisition of shopping centre Magistral and the development of
shopping centre Rocca al Mare in the region are discussed above in
further detail.
Turnover and Profit
Turnover for the period came to EUR 108.1 million (EUR 86.4 million),
mainly coming from the rental income generated by Citycon's retail
premises. Gross rental income accounted for 95.4 per cent (96.6%) of
turnover.
Operating profit rose to EUR 276.2 million (EUR 154.0 million).
Profit before taxes came to EUR 243.5 million (EUR 131.9 million) and
profit after taxes was EUR 194.0 million (EUR 100.0 million). The
increase in operating profit was chiefly due to changes in the fair
value of the property portfolio, and the operating profit generated
by the acquired properties.
The effect of changes in fair value of the property portfolio, of
gains on sales and of other one-off items on the profit attributable
to the parent company's shareholders was EUR 169.3 million (EUR 76.2
million). Taking this effect into account, the profit after tax
attributable to the parent company's shareholders was EUR 2.1 million
below that of the same period last year. The decline was mainly due
to higher interest expenses, a one-time exchange rate gain in the
comparison period, the divestment of non-core properties, added
development activities, and costs related to expanded business
operations.
Earnings per share came to EUR 1.01 (EUR 0.64). Earnings per share
excluding changes in fair value, gains on sales, other one-off items
and their tax impacts were EUR 0.12 (EUR 0.15).
Net cash flow from the operating activities per share amounted to EUR
0.14 (EUR 0.14).
Human Resources and Administrative Expenses
At the end of the period, the Citycon Group had a total of 95 (70)
employees, of whom 68 were employed in Finland, 21 in Sweden and six
in the Baltic countries. Administrative expenses rose to EUR 12.6
million (EUR 9.7 million), including EUR 0.7 million (EUR 0.6
million) in deferred expenses related to employee stock options and
the share-based incentive scheme announced in April. The higher
expenses were partly due to the expansion of the company's operations
and to the cost of creating the new regional organisation.
Capital Expenditure
Citycon's reported gross capital expenditure in the period totalled
EUR 559.8 million (EUR 387.5 million). Of this, EUR 518.6 million
(EUR 364.1 million) accounted for property acquisitions, EUR 40.9
million (EUR 23.2 million) for property development and EUR 0.3
million (EUR 0.2 million) for other investments.
The investments were mainly financed with the directed share issue
worth approximately EUR 133.8 million and a bridge funding deal for
EUR 300 million made with a Nordic banking group. In September the
company initiated a rights issue that generated EUR 99 million in new
equity.
Balance Sheet and Financial Position
The period-end balance sheet total stood at EUR 2,318.5 million (EUR
1,513.9 million). Liabilities totalled EUR 1,364.5 million (EUR 966.5
million), with short-term liabilities accounting for EUR 449.3
million (EUR 141.9 million). The Group's financial position remained
healthy during the period.
Year-on-year interest-bearing debt increased by EUR 362.2 million to
EUR 1,246.1 million (EUR 883.9 million). The fair value of Group's
interest-bearing debt stood at EUR 1,263.7 million (EUR 903.0
million). The debt includes bridge financing of EUR 300 million from
a Nordic banking group for the acquisition of shopping centre Iso
Omena.
The Group's cash and cash equivalents totalled EUR 79.4 million (EUR
24.9 million). The fair value of Group interest-bearing net debt
stood at EUR 1,184.3 million (EUR 878.2 million). Cash and cash
equivalents on 30 September 2007 included EUR 51.2 million from the
subscriptions in the rights issue that was under way.
The bridge funding agreement consists of two tranches: a EUR 100
million tranche of six months, with an extension option for a further
90 days, and a EUR 200 million facility of up to twelve months
Margins for the facility are 0.25 - 0.30% p.a. over Euribor .The six
months' tranche was prepaid on 15 October 2007 from proceeds of the
rights issue.
In August the company exercised its right to extend the maturity of
EUR 165 million revolving credit facility related to the EUR 600
million syndicated loan raised in 2006. The credit facility's
maturity was extended by one year from August 2010 to August 2011.
The year-to-date average interest rate was 4.61 per cent (4.31%)
during the reporting period. The increase of the average interest
rate was moderate in comparison to the rapid increase in short-term
interest rates in the company's operating areas. The average loan
maturity, weighted according to principals of the loans, decreased to
3.6 years (4.6 years), while the average time to fixing decreased to
3.0 years (3.4 years). The reduction of average loan maturity and
average time to fixing is mainly attributable to short term EUR 300
million bridge financing facility. The interest rate, interest rate
swaps included, averaged 4.75 per cent at the end of September.
The Group's equity ratio stood at 41.2 per cent (36.2 per cent).
Period-end gearing stood at 122.3 per cent (156.9%). The decreased
gearing and the improved equity ratio during the reporting period
were due to the directed share issue and the good profit performance.
Out of Citycon's period-end interest-bearing debt, 82.9 per cent
(79.8%) were floating-rate loans, of which 59.0 per cent (63.4%) had
been converted into fixed-rate ones by means of interest rate swaps.
Fixed-rate debt accounted for 66.0 per cent (70.8%) of the Group's
period-end interest-bearing debt, the interest-rate swaps included.
The decrease in hedging was due to the bridge loan of EUR 300 million
to finance the Iso Omena acquisition, which had a lower hedging ratio
compared with the rest of the loan portfolio.
Citycon applies hedge accounting, whereby changes in fair market
value of interest-rate swaps subject to hedge accounting are
recognised under equity. The period-end nominal amount of
interest-rate swaps totalled EUR 668.4 million (EUR 457.3 million),
with hedge accounting applied to interest rate swaps whose nominal
amount totalled EUR 591.2 million (EUR 457.3 million). The nominal
amount of the Group's all derivative contracts totalled EUR 745.3
million (EUR 457.3 million), and their fair market value was EUR 6.2
million (EUR -7.3 million).
Net financial expenses increased by EUR 10.6 million to EUR 32.7
million (EUR 22.2 million). This increase came mainly from higher
interest expenses due to the higher level of interest-bearing debt,
additional expenses resulting from an option on convertible bonds and
from non-cash mark-to-market loss from derivatives recognized in the
income statement. The net financial expenses in the income statement
include EUR 1.3 million (EUR 0.3 million) in non-cash expenses
related to the option component on convertible bonds.
Rights Issue
On 10 September 2007, the Board of Directors decided on a share issue
based on shareholders' pre-emptive subscription rights, worth
approximately EUR 99 million, pursuant to an authorisation granted by
the AGM on 13 March 2007. The share issue was completed successfully.
A total of 27,594,782 new shares were offered for subscription at a
price of EUR 3.60 per share. The subscription period began on 19
September and ended on 3 October 2007. By 30 September, Citycon had
received EUR 51.2 million as rights issue proceeds and this amount is
recognized in the balance sheet under Share issue account. Each
shareholder had the right to subscribe for one new share per seven
shares held. All offered shares were subscribed for in the share
offering. A total of 27,235,387 shares were subscribed for in the
primary subscription representing 98.7 per cent of the shares
offered. The secondary subscription was over-subscribed. The offered
shares represented around 14.3 per cent of the total shares and
voting rights in the company prior to the offering, and around 12.5
per cent following the offering. The new shares entitle their holders
to a dividend for the financial year 2007.
The funds received from the share issue will be used to repay a part
of the short-term credit line raised to fund the acquisition of the
shopping centre Iso Omena in September. Citycon intends to fund its
growth strategy by flexibly utilising equity-linked financing and
debt financing in order to ensure an optimal funding structure,
taking into account the progress of planned investments. Investments
may also be funded through the divestment of non-core properties.
The details of the rights issue are presented in the stock exchange
releases issued by Citycon in September and October 2007, and
available on the company's website at www.citycon.fi.
Share Capital and Shares
At the beginning of 2007, Citycon Oyj's registered share capital
totalled EUR 225.7 million and the number of shares 167.2 million. In
January-September, the company's share capital has increased by EUR
33.9 million and the number of shares by 26.0 million as a result of
a directed share issue and exercise of stock option rights. The table
below shows the changes in share capital and number of shares in more
detail. At the end of September, the company's registered share
capital totalled EUR 259.6 million, and the number of shares came to
193.2 million. The company has a single series of shares, with each
share confering entitlement to one vote at general meetings of
shareholders. The shares have no nominal value.
Changes in Share Capital and Shares, 1 January-30 September 2007
Date Reason Change, EUR Change, Share capital, No. of
2007 no. of EUR shares
shares
1 Jan. 225,697,293.00 167,183,180
9 Feb. Increase 123,217.20 91,272 225,820,510.20 167,274,452
(stock
options)
15 Feb. Increase 33,750,000.00 25,000,000 259,570,510.20 192,274,452
(directed
share
issue)
27 Increase - 206,441 - 192,480,893
April (stock
options)
14 June Increase - 21,854 - 192,502,747
(stock
options)
24 July Increase - 307,524 - 192,810,271
(stock
options)
11 Increase - 353,201 - 193,163,472
Sept. (stock
options)
30 259,570,510.20 193,163,472
Sept.
Because the company's shares no longer have a nominal value, and as
the terms of the stock options were changed by the decision of the
AGM so that the subscription price of shares subscribed by exercising
stock option rights is recognised under the invested unrestricted
equity fund, the company's share capital will no longer increase as a
result of share subscriptions based on stock options.
Between January and September, the number of Citycon shares traded on
the OMX Nordic Exchange Helsinki totalled 114.8 million (40.2
million), at a total value of EUR 580.3 million (EUR 149.8 million).
The highest quotation was EUR 6.09 (EUR 4.23) and the lowest EUR 4.11
(EUR 3.02). The reported volume-weighted average price was EUR 5.03
(EUR 3.73) and the share closed at EUR 4.47 (EUR 4.15). The company's
market capitalisation on 30 September totalled EUR 863.4 million (EUR
690.9 million).
Directed Share Issue
Citycon strengthened its balance sheet by conducting a directed share
issue in February. The issue was based on authorisation given by an
extraordinary general meeting on 26 January 2007. The share issue was
directed at Finnish and international institutional investors,
excluding the pre-emptive subscription rights of shareholders, and
completed through an accelerated bidding process between 12 and 13
February 2007. The share issue resulted in 25 million new shares
being subscribed for at a per-share subscription price of EUR 5.35.
The new shares entitle their holders to a dividend for the 2007
financial year.
The details of the directed share issue are presented in the stock
exchange releases issued by Citycon in February, and available on the
company's website at www.citycon.fi.
Board Authorisations
The AGM held on 13 March 2007 authorised the Board of Directors to
decide on issuing new shares and disposing of treasury shares through
paid or free share issues. New shares can be issued and treasury
shares can be transferred to shareholders in proportion to their
existing shareholding or through a directed share issue waiving the
pre-emptive subscription rights of shareholders, if a weighty
financial reason exists for doing so. The Board can also decide on a
free share issue to the company itself. In addition, the Board was
authorised to grant special rights referred to in Section 1 of
Chapter 10 of the Finnish Companies Act, entitling their holders to
receive, against payment, new shares in the company or treasury
shares. The combined number of new shares to be issued and treasury
shares to be transferred, including the shares granted on the basis
of the special rights, may not exceed 100 million. These
authorisations are valid for five years from the date of the AGM.
The Board exercised this authorisation on 10 September 2007, when it
decided on a share issue based on shareholders' pre-emptive
subscription rights. A maximum of 27,594,782 shares were offered for
subscription by shareholders. As a result of this, the number of
shares that can be issued of disposed of on the basis of the
authorisations described above now totals 72,405,218 shares.
The other decisions of the AGM are presented in the stock exchange
release issued by the company on 13 March 2007 and available on the
company's website at www.citycon.fi.
Reported Changes in Share Ownership
Fidelity International Limited notified the company in February that
the holdings of its direct and indirect subsidiaries in Citycon Oyj
had fallen below the ten per cent threshold. According to the
notification, Fidelity International Limited and its direct and
indirect subsidiaries held 17,297,574 Citycon shares on 14 February
2007, equivalent to nine per cent of the company's share capital and
voting rights at the time.
ING Clarion Real Estate Securities, L.P. notified the company in
August that its holding in Citycon Oyj's voting rights and share
capital had risen above the threshold of five per cent. According to
the notification, ING Clarion Real Estate Securities, L.P. held
9,726,700 shares on 24 August 2007, equivalent to 5.04 per cent of
the company's share capital and voting rights at the time.
Stock Options
Stock Options 1999
An extraordinary general meeting of Citycon held on 4 November 1999
authorised the issue of a maximum of 5,500,000 stock options. Of
these, 5,327,000 options were granted to the personnel. The rest of
the options were granted to Citycon's fully-owned subsidiary
Veniamo-Invest Oy, which has no right to subscribe for its parent
company's shares. The share subscription period for the 1999 A/B/C
options expired at the end of September. By the end of the
subscription period, a total of 5,631,912 Citycon shares had been
subscribed by exercising the 1999 stock options, including 825,982
shares subscribed at a EUR 1.35 per-share subscription price between
January and September 2007. The 71,370 shares subscribed in September
2007 are expected to be registered in the Trade Register on 24
October 2007. Shares subscribed in 2007 entitle their holders to a
dividend for the financial year 2007.
Of the 1999 option rights, only the 172,500 options held by
Veniamo-Invest Oy remained unexercised. These options have expired
worthless.
Stock Options 2004
The annual general meeting held on 15 March 2004 authorised the issue
of a maximum of 3,900,000 stock options. Of these, 3,290,000 A/B/C
options were held by Group employees at the end of the reporting
period. The stock options 2004A and 2004B are listed on the OMX
Nordic Exchange Helsinki. Trading in 2004B options began on 3
September 2007.
The basic data of the 2004 stock option scheme as of 30 September
2007 is shown in the table below. Amendments made to the terms and
conditions of the 2004 option scheme as a result of the rights issue
came into effect on 10 October 2007. The amendments to the terms are
described in Events after the Period, below.
Stock options, 30 September 2007 2004 A 2004 B 2004 C
No. of options granted 1,040,000 1,090,000 1,160,000
No. held by Veniamo-Invest Oy (¹ 260,000 210,000 140,000
No. of options exercised 211,220 - -
No. of shares subscribed with
options 224,123 - -
Subscription ratio, option/shares 1:1.0611 1:1.0611 1:1.0611
Subscription price per share, EUR
(² 2.1636 2.6066 4.55
Subscription period begins 1 Sep 2006 1 Sep 2007 1 Sep 2008
Subscription period ends 31 Mar 2009 31 Mar 2010 31 Mar 2011
¹) Veniamo-Invest Oy has no right to subscribe for its parent
company's shares.
²) Following dividend distribution for 2006. The share subscription
prices are reduced by half of the per-share dividends paid. However,
the share subscription price is always at least EUR 1.35.
From January to September, 126,670 new shares were subscribed at a
per-share subscription price of EUR 2.1636 by exercising the A
options attached to Citycon's 2004 stock option scheme. No 2004 B
options have been exercised. Shares subscribed in 2007 entitle their
holders to a dividend for the financial year 2007.
Near-term Risks and Uncertainties
Citycon estimates that major near-term risks and uncertainties are
associated with economic development in the company's operating
regions, and changes in the fair value of investment properties and
interest rates. As the focus of Citycon's growth strategy is shifting
from property acquisitions to own property development and
construction, also the risks associated with project management and
with increasing construction costs will be more significant. A marked
increase in interest rates, materialization of a major project risk,
considerably higher construction costs, a decline in the fair value
of investment properties or a sharp economic slowdown in Finland,
Sweden or the Baltic countries could have an adverse effect on
Citycon's business and profit performance.
The turbulence in the financial market that began in the late summer
has resulted in a clear increase in short-term interest rates and
difficulties in banks' own funding activities, which may
significantly affect the availability of funding for Citycon and
increase future credit margins and financing costs if the uncertainty
continues for a prolonged period. This could have a negative effect
on the implementation of Citycon's strategy and on the company's
business and profits. The company aims to hedge the risk of changes
in the financial market by applying a conservative funding policy,
which has thus far kept the company's financial expenses from rising
significantly and the availability of financing from decreasing.
Events after the Reporting Period
Share Issue and the Related Amendments to the Terms of Convertible
Bonds and Stock Options
All offered 27,594,782 shares were subscribed for in the share issue
carried out in September and October based on shareholders'
pre-emptive subscription rights. The new shares were recorded on 10
October and have been traded on the OMX Nordic Exchange Helsinki
since 11 October 2007. Following the share issue, the company has a
total of 220,758,254 shares and a share capital of EUR
259,570,510.20. The share capital did not change because the share
subscription price was recorded in the invested unrestricted equity
fund.
In order to ensure equal treatment of the company's stock option and
convertible capital bond holders as well as the shareholders, the
Board of Directors of Citycon decided on 10 September 2007 upon
amendments to the terms and conditions of the stock options and the
convertible capital bonds as a result of the rights issue.
The Board decided to adjust the conversion price of the convertible
capital bonds listed on 22 August 2006, in accordance with Section
6(b)(iv) of the terms and conditions of the convertible bonds, from
EUR 4.3432 to EUR 4.20. The amendment of the conversion price came
into effect on 4 October 2007. In accordance with the terms of the
2004 stock option scheme, the subscription prices and number of
shares subscribed with the options were amended so that each 2004
option entitles its holder to subscribe for 1.2127 shares and that
the per-share subscription price for 2004 A options is EUR 2.3432,
for 2004 B options EUR 2.7308 and for 2004 C options EUR 4.4313. The
subscription prices will be reduced by half of the per-share
dividends payable, if any. The amendments to the terms and conditions
of the stock options came into effect on 10 October 2007.
In accordance with the amended terms and conditions, the maximum
number of new shares that can still be subscribed by exercising the
stock options attached to the 2004 option scheme amounts to
4,473,383, including stock options held by Veniamo-Invest Oy.
Market Court's Decision on Citycon's Appeal regarding Ratina Tender
Procedure
The Finnish Market Court issued on 12 October 2007 a decision to
disallow the petition filed by Citycon Oyj and Skanska Talonrakennus
Oy on 27 April 2006 in the tender procedure regarding the
construction of a shopping centre and related areas in Ratina region
in the City of Tampere, Finland. The company has reported on the
subject matter in stock exchange releases issued on 27 April 2006 and
15 October 2007 available on the company's website www.citycon.fi.
Outlook
Citycon expects the development and redevelopment projects to play a
central role in its business. The company will remain active in
seeking acquisition and development opportunities while implementing
its expansion strategy. Citycon estimates that its operating profit,
excluding fair value changes and gains on sale of investment
properties, will grow in 2007. This outlook is based on the company's
focus on the growth in leasable area and therefore in rental income.
Helsinki, 18 October 2007
Citycon Oyj
Board of Directors
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS 30 September 2007
Condensed Consolidated Income Statement, IFRS
Q3 Q3 Q1-3 Q1-3
EUR million 2007 2006 Change 2007 2006 Change 2006
Gross rental
income 36.3 30.6 18.6% 103.2 83.4 23.6% 115.1
Service charge
income 1.6 0.7 137.4% 5.0 2.9 70.1% 4.2
Turnover
(note 3) 38.0 31.3 21.2% 108.1 86.4 25.2% 119.4
Property
operating
expenses 10.7 9.5 12.3% 31.8 25.4 25.2% 36.0
Other expenses
from leasing
operations 0.0 0.2 -94.3% 0.1 0.4 -72.4% 0.6
Net rental
income 27.3 21.6 26.3% 76.3 60.6 25.9% 82.8
Administrative
expenses 4.0 3.7 8.3% 12.6 9.7 30.8% 12.9
Other
operating
income and
expenses 0.0 0.0 145.8% 0.0 0.3 -113.4% 0.6
Net fair value
gains on
investment
property 21.1 21.6 -2.5% 212.7 97.0 119.4% 120.1
Net gains on
sale of
investment
property -0.1 5.8 -100.9% -0.1 5.8 -100.9% 5.9
Operating
profit 44.3 45.4 -2.3% 276.2 154.0 79.4% 196.5
Net financial
income and
expenses 13.3 9.3 43.7% 32.7 22.2 47.7% 30.9
Profit before
taxes 31.0 36.1 -14.1% 243.5 131.9 84.7% 165.6
Current taxes -2.4 -3.4 -28.7% -6.6 -6.4 3.9% -7.4
Change in
deferred taxes -5.0 -5.4 -7.8% -42.9 -25.5 68.0% -31.8
Profit for the
period 23.6 27.3 -13.5% 194.0 100.0 94.1% 126.4
Attributable to
Parent
company
shareholders 23.4 27.5 -14.8% 191.0 99.9 91.1% 124.9
Minority
interest 0.2 -0.2 -197.7% 3.0 0.0 - 1.5
Earnings per
share (basic),
EUR 0.12 0.17 -28.5% 1.01 0.64 59.0% 0.78
Earnings per
share (diluted),
EUR 0.11 0.15 -27.9% 0.91 0.62 46.6% 0.74
Condensed Consolidated Balance Sheet, IFRS
31 Dec.
EUR million Note 30 Sep. 2007 30 Sep. 2006 2006
Assets
Non-current assets
Investment property 4 2,191.2 1,404.5 1,447.9
Development property 5 21.1 0.0 -
Other property, plant
and equipment 0.7 0.8 0.6
Derivative financial
instruments and other
non-current assets 7 10.9 1.7 4.8
Total non-current assets 2,224.0 1,407.0 1,453.3
Current assets
Derivative financial
instruments 7 0.1 - 0.4
Trade and other
receivables 15.0 82.0 11.3
Cash and cash
equivalents 6 79.4 24.9 21.3
Total current assets 94.5 106.9 33.1
Total assets 2,318.5 1,513.9 1,486.4
Liabilities and Shareholders'
Equity
Equity attributable to
parent company
shareholders
Share capital 259.6 224.8 225.7
Share issue 51.2 - 0.1
Share premium fund and
other restricted reserves 131.1 131.1 131.1
Fair value reserve 7 4.9 -5.4 -1.3
Invested unrestricted
equity fund 100.2 - -
Retained earnings 377.7 184.4 209.7
Total equity attributable
to parent company
shareholders 924.9 534.9 565.3
Minority interest 29.0 12.4 15.0
Total shareholders' equity 953.9 547.4 580.3
Liabilities
Interest-bearing debt 827.5 784.6 726.3
Derivative financial
instruments and other
non-interest bearing
liabilities 7 2.7 7.3 4.9
Deferred tax liabilities 85.1 32.7 40.4
Total long-term liabilities 915.2 824.6 771.7
Interest-bearing debt 418.6 99.4 87.6
Trade and other payables 30.7 42.5 46.8
Short-term liabilities 449.3 141.9 134.4
Total liabilities 1,364.5 966.5 906.1
Total liabilities and
shareholders' equity 2,318.5 1,513.9 1,486.4
Condensed Consolidated Statement of Changes in Shareholders' Equity,
IFRS
Equity attributable to parent company
shareholders
Share
premium
fund Invested
and unrest-
other Fair ricted
Share Share re- value equity Retained
capital issue serves reserve fund earnings
Balance at 1 Jan.
2006 184.1 1.1 85.4 -10.5 - 96.5
Cash flow hedges 5.1
Profit for the
period 99.9
Total recognized
income and expense
for the period 5.1 99.9
Share issue 38.7 -1.1 37.2
Share
subscriptions
based on stock
options 2.0
Dividends
(Note 8) -6.6 -12.6
Share-based
payment 0.6
Equity instrument
of convertible
capital loan 15.1
Other changes
Balance at 30 Sep.
2006 224.8 - 131.1 -5.4 0.0 184.4
Balance at 1 Jan.
2007 225.7 0.1 131.1 -1.3 - 209.7
Cash flow hedges 6.3
Profit for the
period 191.0
Total recognized
income and expense
for the period 6.3 191.0
Share issue 33.8 51.2 98.8
Share
subscriptions
based on stock
options 0.1 -0.1 0.0 1.4
Dividends (Note 8) -23.4
Translation
differences -0.3
Share-based payment 0.7
Other changes 0.0
Balance at 30 Sep.
2007 259.6 51.2 131.1 4.9 100.2 377.7
Equity Minority Shareholders'
attributable to interest equity, total
parent company
shareholders
Balance at 1 Jan. 2006 356.6 3.6 360.2
Cash flow hedges 5.1 5.1
Profit for the period 99.9 0.0 100.0
Total recognized income
and expense for the
period 105.1 0.0 105.1
Share issue 74.8 74.8
Share subscriptions
based on stock options 2.0 2.0
Dividends (Note 8) -19.2 -19.2
Share-based payment 0.6 0.6
Equity instrument of
convertible capital loan 15.1 15.1
Other changes 0.0 8.8 8.8
Balance at 30 Sep. 2006 534.9 12.4 547.4
Balance at 1 Jan. 2007 565.3 15.0 580.3
Cash flow hedges 6.3 6.3
Profit for the period 191.0 3.0 194.0
Total recognized income
and expense for the period 197.3 3.0 200.3
Share issue 183.8 183.8
Share subscriptions
based on stock options 1.4 1.4
Dividends (Note 8) -23.4 -23.4
Translation differences -0.3 -0.1 -0.5
Share-based payment 0.7 0.7
Other changes 0.0 11.2 11.2
Balance at 30 Sep. 2007 924.9 29.0 953.9
Condensed Consolidated Cash Flow Statement, IFRS
EUR million Note Q1-3/2007 Q1-3/2006 2006
Cash flow from operating activities
Profit before taxes 243.5 131.9 165.6
Adjustments -178.9 -79.8 -94.0
Cash flow before change
in working capital 64.6 52.1 71.6
Change in working capital -4.2 -1.1 -0.5
Cash generated from operations 60.4 50.9 71.1
Paid interest and other
financial charges -28.8 -26.6 -34.1
Received interest and
other financial income 2.0 0.7 0.9
Taxes paid -7.4 -3.6 -5.9
Net cash from operating activities 26.2 21.4 32.0
Cash flow from investing activities
Acquisition of
subsidiaries, less cash
acquired -509.2 -327.9 -331.8
Acquisition of
investment property 4 -15.9 -32.3 -33.6
Capital expenditure on
investment properties 4 -26.1 -23.5 -35.6
Capital expenditure on
development properties,
other PP&E and
intangible assets 5 -14.8 - -
Sale of investment
property 0.3 0.6 73.9
Net cash used in
investing activities -565.7 -383.1 -327.1
Cash flow from financing activities
Proceeds from share
issue 133.6 73.6 77.4
Proceeds from pending
share issue 51.2 - -
Proceeds from short-
term loans 481.6 344.0 421.2
Repayments of short-
term loans -120.5 -241.0 -392.2
Proceeds from long-term
loans 266.9 675.3 675.3
Repayments of long-
term loans -191.5 -461.8 -461.8
Dividends paid 8 -23.4 -19.2 -19.2
Net cash from/used in
financing activities 597.8 370.9 300.8
Net change in cash and
cash equivalents 58.3 9.3 5.7
Cash and cash equivalents
at period-start 6 21.3 15.6 15.6
Effects of exchange rate
changes -0.2 - -
Cash and cash equivalents
at period-end 6 79.4 24.9 21.3
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basic company data
Citycon is a real estate company investing in retail premises.
Citycon operates mainly in Finland, Sweden and the Baltic countries.
Citycon is a Finnish public limited company established under Finnish
law and domiciled in Helsinki. The Board of Directors approved the
interim financial statements on 18 October 2007.
2. Basis of preparation and accounting policies
Basis of preparation
The interim condensed consolidated financial statements for the nine
months ended 30 September 2007 have been prepared in accordance with
IAS 34 Interim Financial Reporting. The interim financial statements
do not include all the disclosures required in the annual financial
statements. Therefore, they should be read in conjunction with
Citycon's annual financial statements for the year ended 2006.
Accounting policies
Citycon changed its accounting policies related to IAS 23 Borrowing
Costs -standard as of 1 January 2007 and started to apply an
alternative treatment allowed by IAS 23. The standard allows that the
borrowing costs such as interest expenses and arrangement fees are
capitalised as part of the cost of development properties.
Otherwise, the accounting policies adopted in the preparation of the
interim condensed consolidated financial statements are consistent
with those applied in the preparation of Citycon's annual financial
statements for the year ended 31 December 2006.
Acquisitions in the balance sheet
Magistral and Iso Omena shopping centres were acquired in July and
September 2007, respectively. The identifiable assets and liabilities
of the acquisitions, corresponding to the shares acquired, have been
recognized at preliminary fair value in the company's balance sheet.
Reporting to Gazit-Globe Ltd.
The company's main shareholder, Gazit-Globe Ltd, holding
approximately 39 per cent of the shares in the company, has announced
that it applies International Financial Reporting Standards (IFRS) in
its financial reporting in 2007. According to IFRS one company may
exercise a controlling interest in another company even if its
shareholding it that company does not exceed 50 per cent. Gazit-Globe
Ltd. holds the view that it exercises controlling interest, as
defined in IFRS, in Citycon Oyj based on the fact that it has been
able to exercise controlling interest in Citycon Oyj's shareholders'
meetings pursuant to its shareholding. In accordance with an
agreement concluded between the companies, Citycon Oyj will provide
Gazit-Globe Ltd. with a more detailed breakdown of the accounting
information it discloses in its interim and full-year reports so that
Gazit-Globe Ltd. can consolidate Citycon Group figures into its own
IFRS financial statements.
3. Segment Information
Citycon's business consists of the regional business units Finland,
Sweden and the Baltic Countries.
Q3/ Q3/ Q1-3/ Q1-3/
EUR million 2007 2006 Change 2007 2006 Change 2006
Turnover
Finland 25.5 24.7 3.1 % 74.1 71.8 3.2% 95.8
Sweden 10.1 4.8 109.8 % 28.0 10.2 175.5% 17.3
Baltic
Countries 2.3 1.7 33.7 % 6.0 4.4 37.0% 6.2
Total 38.0 31.3 21.2 % 108.1 86.4 25.2% 119.4
Operating profit
Finland 33.9 42.6 -20.4 % 201.2 145.8 38.0% 176.1
Sweden 7.6 1.5 437.7 % 67.0 4.9 - 16.8
Baltic
Countries 4.2 3.7 15.9 % 13.3 8.6 53.9% 10.9
Other -1.4 -2.4 -26.0 % -5.3 -5.3 -1.5% -7.2
Total 44.3 45.4 -2.3 % 276.2 154.0 79.4% 196.5
EUR million 30 Sep. 2007 31 Dec. 2006 Change
Assets
Finland 1,562.3 1016.6 53.7%
Sweden 543.9 358.0 51.9%
Baltic Countries 119.0 83.6 42.3%
Other 93.2 28.2 231.2%
Total 2,318.5 1,486.4 56.0%
The significant increase in segment assets is due to the acquisitions
of the shopping centres and the increase in fair value of investment
properties.
4. Investment property
EUR million 30 Sep. 2007 30 Sep. 2006 31 Dec. 2006
At period-start 1,447.9 956.6 956.6
Additions 543.7 417.1 436.2
Disposals -0.3 -67.9 -67.9
Transfer into the development
properties -6.4 - -
Net fair value gains 213.0 97.0 120.1
Exchange differences -6.7 1.8 2.9
At period-end 2,191.2 1,404.5 1,447.9
An external professional appraiser has conducted the valuation of the
company's properties with a net rental income based cash flow
analysis. Market rents, occupancy rate, operating expenses and yield
requirement form the key variables used in the cash flow analysis.
The segments' yield requirements used by the external appraiser in
the cash flow analysis were as follows at 30 September 2007 and 31
December 2006:
Yield requirement (%) 30 Sep. 2007 31 Dec. 2006
Finland 5.8 6.6
Sweden 5.4 6.4
Baltic Countries 6.3 7.1
Average 5.7 6.6
5. Development property
When Citycon redevelops its existing investment properties, the
properties remain as the investment properties in the balance sheet,
and they are measured based on fair value model in accordance with
IAS 40. The significant development projects, in which a new building
or significant extension is constructed, are exceptions and they are
treated in accordance with IAS 16 Property, Plant and Equipment
standard. The significant extension projects are presented separately
from the property, plant and equipment in the balance sheet based on
the recommendations of the European Public Real Estate Association
(EPRA). As at 30 September 2007, the development properties consisted
of the capital expenditure relating to extension projects in Rocca al
Mare, Åkersberga and Liljeholmen shopping centres. Investments in
development properties during the nine months ended 30 September 2007
amounted to EUR 14.8 (EUR 0.0 million) and the development property
in the balance sheet totalled EUR 21.1 million at 30 September 2007.
Interest expenses amounting EUR 0.4 million (EUR 0.0 million) have
been capitalized as part of the cost of development properties.
6. Cash and cash equivalents
EUR million 30 Sep. 2007 30 Sep. 2006 31 Dec. 2006
Cash in hand and at bank 27.7 21.4 19.4
Restricted cash in
hand and at bank - 1.0 -
Short-term deposits 51.7 2.5 1.9
Total 79.4 24.9 21.3
7. Derivative Financial Instruments
EUR million 30 Sep. 2007 30 Sep. 2006 31 Dec. 2006
Nominal Fair Nominal Fair Nominal Fair
amount value amount value amount value
Interest rate derivatives
Interest rate swaps
Maturity:
less than 1 year 50.0 0.1 50.0 0.4 50.0 0.4
1-2 years 87.1 -0.8 40.0 -0.3 40.0 0.0
2-3 years 149.0 -1.6 86.0 -3.0 86.0 -2.6
3-4 years 70.0 0.7 83.0 -3.7 83.0 -2.6
4-5 years 0.0 0.0 40.0 -0.2 40.0 -0.8
over 5 years 312.2 8.7 158.3 -0.4 242.7 3.8
Total 668.4 7.1 457.3 -7.3 541.7 -1.8
Foreign exchange derivatives
Forward agreements
Maturity:
less than 1 year 76.9 -0.9 0.0 0.0 14.8 0.0
Total 76.9 -0.9 0.0 0.0 14.8 0.0
The fair value of derivative financial instruments represents the
market value of the instrument with prices prevailing on the balance
sheet date. Derivative financial instruments are used in hedging the
interest rate risk of the interest bearing liabilities and foreign
currency risk.
The fair values include foreign exchange loss of EUR 1.8 million (EUR
0.0 million) which is recognized in the income statement.
Hedge accounting is applied for interest rates swaps which have
nominal amount of EUR 591.2 million (EUR 457.3 million). The fair
value gain recognized in the fair value reserve under shareholders'
equity taking account the tax effect totals EUR 4.9 million (EUR -5.4
million).
8. Dividends
In accordance with the proposal by the Board of Directors and the
decision by the Annual General Meeting held on 13 March 2007 dividend
for the financial year 2006 amounted to EUR 0.14 per share (EUR 0.14
for the financial year 2005).
Dividends paid amounted to EUR 23.4 million (EUR 19.2 million) during
the period.
9. Contingent Liabilities
EUR million 30 Sep. 2007 30 Sep. 2006 31 Dec. 2006
Mortgages on land and
buildings 47.7 7.8 21.1
Bank guarantees 19.9 16.4 37.1
Capital commitments 58.1 - 40.7
At 30 September 2007, Citycon had capital commitments of EUR 58.1
million relating mainly to development projects.
10. Key Figures
Q3/ Q3/ Q1-3/ Q1-3/
2007 2006 Change 2007 2006 Change 2006
Earnings per share
(basic), EUR 0.12 0.17 -28.5 % 1.01 0.64 59.0% 0.78
Earnings per share
(diluted), EUR (EPRA
EPS) 0.11 0.15 -27.9 % 0.91 0.62 46.6% 0.74
Equity per share, EUR 4.52 3.21 40.8% 3.38
Net asset value (EPRA
NAV) per share, EUR 4.94 3.42 44.3% 3.61
Equity ratio, % 41.2 36.2 - 39.1
The formulas for key figures can be found from the 2006 annual
financial statements.
The figures are unaudited.
Full-year results 2007
Citycon will publish its full-year financial results for the
financial year 2007 on Thursday, 14 February 2008, at around noon.
For further information for investors, please visit Citycon's
website, www.citycon.fi.
For further information, please contact:
Mr Petri Olkinuora, CEO
Tel.: +358 9 6803 6738 or +358 400 333 256
petri.olkinuora@citycon.fi
Mr Eero Sihvonen, CFO
Tel.: +358 50 557 9137
eero.sihvonen@citycon.fi
Distribution:
OMX Nordic Exchange Helsinki
Major media
www.citycon.fi
Report on the general review of Citycon Oyj's interim report for the
period 1 January-30 September 2007
We have generally reviewed the interim report of Citycon Oyj for the
period 1 January-30 September 2007. The Board of Directors and the
Managing Director have prepared an interim report in accordance with
the Securities Market Act, chapter 2, paragraph 5. Based on our
interim review we express at the request of the Board of Directors a
report in accordance with the Securities Market Act, chapter 2,
paragraph 5 a.
We conducted our general review in accordance with the International
Standard on Auditing applicable to general review engagements. This
standard requires that we plan and perform the review to obtain
reasonable assurance as to whether the financial statements are free
of material misstatement. The general review is limited primarily to
inquiries of company personnel and analytical procedures applied to
financial data and thus provides less assurance than an audit. We
have not performed an audit and, accordingly, we do not express an
audit opinion.
Based on our general review, nothing has come to our attention that
causes us to believe that the interim report does not give a true and
fair view in accordance with the Securities Market Act regarding the
financial position of Citycon Oyj.
Helsinki, October 18, 2007
Ernst & Young Oy
Tuija Korpelainen, Authorized Public Accountant