Citycon's Financial Results for 1 January-31 December 2005
Citycon's growth process outside Finland began with shopping centre investments
in Sweden and Estonia. Foreign properties accounted for 14.3 per cent of the
property portfolio at the year-end.
Year 2005 in brief
Key figures
- Turnover increased to EUR 92.2 million (2004: EUR 84.7 million) mainly due to
property acquisitions in Finland, Sweden and Estonia during 2004 and 2005.
- Profit before taxes amounted to EUR 74.2 million (EUR 25.7 million), including
EUR 45.9 million increase in the fair value of investment properties and EUR 5.7
million in one-off financial expenses.
- Earnings per share were EUR 0.49 (EUR 0.19, including EUR 0.025 in one-off
deferred tax receivable).
- The Board of Directors proposes a per-share dividend of EUR 0.14 (EUR 0.14).
1-12 2005 1-12 2004
Turnover, EUR million 92.2 84.7
Operating profit, EUR million 105.2 51.8
% of turnover 114.1 61.2
Profit before taxes, EUR million 74.2 25.7
Profit, EUR million 59.8 19.9
Earnings per share, EUR 0.49 0.19
Earnings per share, diluted, EUR 0.49 0.19
Dividend per share, EUR 0.14* 0.14
Equity per share, EUR 2.60 2.12
P/E (price/earnings) ratio 6 13
Return on equity (ROE), % 22.5 9.5
Return on investment (ROI), % 13.5 7.2
Equity ratio, % 36.7 31.4
Gearing, % 156.8 201.3
Net rental income, % 8.4 8.8
Occupancy rate, % 97.2 95.7
Personnel at the end of year 57 45
*Board of Directors' proposal
CEO Petri Olkinuora comments on the financial year as follows:
Citycon's business developed according to plan in 2005. The company executed its
strategy to expand and enter into new markets in Sweden and Estonia. The retail
property market showed favourable development, and the company continued its
profitable growth. In 2006, we will continue to implement our growth strategy
despite ever-toughening competition.
Business
- At year-end, the company owned 21 (16) shopping and retail centres and 127
(130) supermarkets and shops. The market value of Citycon's property portfolio
totalled EUR 956.6 million, of which shopping centres accounted for 66.6 per cent
(60.5 per cent) and supermarkets and shops for 33.4 per cent (39.5 per cent).
- At the end of the reporting year, Citycon had a total of 2,109 leases concluded
with 1,120 lessees. The year-end occupancy rate for Citycon's property portfolio
stood at 97.2 per cent (95.7 per cent) and net yield at 8.4 per cent (8.8 per
cent).
- Citycon's net rental income improved by 6.1 per cent, to EUR 65.9 million,
while the leasable area rose by 21.8 per cent, to 595,973 sq.m.
Capital expenditure
- The internationalisation process began, in line with the company's strategy,
with investments in Sweden and Estonia. The company bought the Rocca al Mare
shopping centre in Estonia and acquired the Åkersberga shopping centre as well as
the Åkermyntan, Fruängen and Kallhäll retail centres in Sweden. At the end of
December, Citycon signed a deal to acquire five other retail centres in Sweden.
- Citycon's most significant shopping-centre property investments in Finland
related to Trio in Lahti, IsoKristiina in Lappeenranta and Sampokeskus in
Rovaniemi. In addition, the company decided to build a new shopping centre in
Hervanta, a district of Tampere.
- Capital expenditure for 2005 totalled EUR 178.5 million (EUR 18.8 million).
Finances
- The Group's equity ratio was 36.7 per cent (31.4 per cent). At year-end,
gearing stood at 156.8 per cent (201.3 per cent).
- In 2005, Citycon arranged two private placements by issuing shares for selected
international and Finnish institutional investors. As a result of these issues
the company's share capital increased by a total of EUR 31.3 million.
- Citycon repaid its I/1999 subordinated loan prematurely on 30 June 2005 and on
17 June 2005 issued the 1/2005 five-year subordinated loan of EUR 70 million at a
fixed annual nominal interest rate of 4.70 per cent. The loan's maturity date is
17 June 2010.
Share performance
- Share performance during the report period was positive: The trade-weighted
average share price rose to EUR 2.95 (EUR 1.94) and the company's market
capitalisation by EUR 150.2 million to EUR 424.1 million.
Business Environment
The Finnish retail property market continued its favourable development in 2005,
characterised by growth in demand for retail premises and high occupancy rates.
Spurred by favourable economic development and the growing need for retail
premises, demand for commercial properties has remained buoyant in both the
Helsinki Metropolitan Area and major regional centres elsewhere in Finland.
Construction of retail premises has remained lively, especially that of shopping
centres in the Helsinki Metropolitan Area. Purchasing power continued its
concentration process in regional centres and demand for premises housed in good
retail sites in particular remained strong. Vacancy rates continued to remain
low.
Foreign investors have continued to show keen interest in the Finnish property-
investment market.
Line of Business and Property Portfolio Summary
Citycon engages in the retail-property business throughout the ownership chain
i.e., ownership, leasing, management and development of properties. Citycon
operates through the following three divisions: Shopping Centres, Supermarkets
and Shops, and Property Development. At the end of the financial year, Citycon
owned 148 properties (146), their fair value totalling EUR 956.6 million (EUR
738.7 million).
Almost all the company's property portfolio consists of retail premises. At year-
end, the company owned 21 shopping and retail centres and 127 supermarkets and
shops, the former accounting for 66.6 per cent and the latter for 33.4 per cent
of the property portfolio's fair value.
On 31 December 2005, 35.1 per cent of the company's properties were located in
the Helsinki Metropolitan Area, 35.5 in other major Finnish cities and 15.1
elsewhere in Finland. Foreign properties accounted for 14.3 per cent of the
property portfolio. These shares are calculated on the basis of fair values.
Changes in Property Portfolio Fair Value
Citycon applies IAS 40 in the valuation of its investment properties, whereby
investment property is measured at fair value, with gains and losses arising from
changes in fair values being included under operating income in the income
statement. Using International Valuation Standards (IVS), an external
professional appraiser conducts the valuation of the company's property at least
once a year. The most recent valuation statement on 31 December status, by
Aberdeen Property Investors Finland Oy, can be found at www.citycon.fi.
During the financial year, the fair value of Citycon's property portfolio rose by
EUR 45.9 million, as a result of changes in general market conditions and the
leasing business. The company recorded a total increase of EUR 60.3 million in
the fair value and a total decrease of EUR 14.3 million in the fair value of the
properties during the financial period.
The year's most significant change in the market included growing interest in the
Finnish property market shown by international investors, especially in
commercial properties. Greater demand will cut the net yield requirements set by
investors while putting upward pressure on property prices, especially in the
liveliest urban growth centres.
Customers, Lease Portfolio and Occupancy Rate
At the end of the reporting year, Citycon had a total of 2,109 leases concluded
with 1,120 lessees, with the length of the leases averaging 3.2 years. The year-
end occupancy rate for Citycon's property portfolio stood at 97.2 per cent (95.7
per cent), this change resulting from normal fluctuations in the leasing business
and new properties in the company's property portfolio.
Lease portfolio summary 2005 2004
Number of leases started during the financial year 298 325
Total area of leases started, sq.m. 31,480 56,606
Occupancy rate at end of financial year ,% 97.2 95.7
Average length of lease portfolio at the end of
financial year, year 3.2 3.4
Shopping Centres Division
Citycon leads the Finnish shopping centre business. Its net rental income from
shopping centres improved by 16.0 per cent, to EUR 40.6 million, accounting for
61.5 per cent of the company's total net rental income, while the leasable area
rose by 49.3 per cent, to 322,900 sq.m.
Key Figures of the Shopping Centres Division
Lease portfolio summary 2005 2004
Number of leases started during the financial year 233 242
Total area of leases started, sq.m. 29,160 32,451
Occupancy rate at end of financial year ,% 98.0 97.4
Average length of lease portfolio at the end of
financial year, year 2.6 2.7
Financial performance 2005 2004
Turnover, EUR million 57.4 48.4
Change in value of investment property, EUR million 22.1 -15.3
Operating profit, EUR million 61.2 18.8
Gross rental income, EUR million 56.1 47.0
Net rental income, EUR million 40.6 35.0
Net rental yield, % 8.2 8.1
Net rental yield, like-to-like properties, % 8.5 8.1
Market value of property portfolio, EUR million 636.7 446.6
Capital expenditure, EUR million 174.9 17.4
The calculation method for net rental yield is based on the guidelines of the KTI
Institute for Real Estate Economics and the IPD Investment Property Databank.
Like-to-like properties refer to properties held by Citycon through the 12-month
reference period. Properties under development and expansion as well as lots are
eliminated from the figures.
Capital expenditure and development projects
In 2005, Citycon's shopping centre business expanded abroad. In July, Citycon was
transferred the title to 75 per cent of the Åkersberga shopping centre in Sweden
and it bought the shopping centre Rocca al Mare in Tallinn, Estonia, including
the latter's adjacent site with potential for a major extension. These
acquisitions formed Citycon's first-ever property investments abroad.
The Åkersberga investment, including the launched extension projects, will total
approximately SEK 900-950 million (EUR 95-100 million). Citycon has undertaken to
buy the remaining holding in the shopping centre once the extension has been
completed. The Åkersberga shopping centre has been included in the company's
accounts since 1 July 2005 and Rocca al Mare since 21 July 2005.
Based on an agreement concluded in September, Citycon acquired retail centres in
Åkermyntan, Kallhäll and Fruängen located in the Stockholm Metropolitan Area,
Sweden; these retail centres have been included in the company's accounts since 1
December 2005.
The most significant shopping centre holdings acquired in Finland included those
in IsoKristiina in Lappeenranta, Trio in Lahti and Sampokeskus in Rovaniemi,
Citycon's respective holdings in these shopping centres increasing to 87.4 per
cent, 88.7 per cent and 100 per cent.
In addition, the company decided to build a new shopping centre in Hervanta, a
district of Tampere. The project's estimated investment totals EUR 25.3 million
and the extension project is scheduled for completion in spring 2007.
The table below shows more detailed information on the 2005 acquisitions.
Acquisitions 2005, Shopping Centres
Property Location Purchase Post-acquisition
price, holdings, %
EUR million
Finland
KOy Karjalan
Kauppakeskus Lappeenranta 7.9 100
KOy Lahden Trio Lahti 18.7 88.7
KOy Lintulankulma Rovaniemi 2.1 100
Sweden
Åkersberga
Centrum AB Österåker 47.4 75
Åkermyntan,
Kallhäll and
Fruängen Stockholm
retail centres Metropolitan Area 27.6 100
Estonia
Rocca al Mare
Kaubanduskeskuse AS Tallinn 62.1 100
In November Citycon announced that it would purchase the Lindome retail centre in
the Greater Gothenburg area, Sweden. The deal was closed at the debt-free price
of SEK 74.5 million (EUR 7.8 million) at the beginning of January 2006.
According to an agreement signed in December, Citycon is to acquire retail
centres in Backa, Hindås, Landvetter and Floda in the Greater Gothenburg area.
The closing is expected to take place in February 2006.
Due to business expansion, Citycon has established organisations responsible for
the shopping-centre business by country within its Shopping Centres division,
effective since 1 January 2006.
Supermarkets and Shops Division
Specialising in the development, lease and management of supermarket and other
retail-outlet properties, the Supermarkets and Shops division's net rental income
accounted for 38.5 per cent of Citycon's total rental income.
Key Figures of Supermarkets and Shops Division
Lease portfolio summary 2005 2004
Number of leases started during the financial year 65 83
Total area of leases started, sq.m. 2,320 24,155
Occupancy rate at end of financial year,% 95.8 93.4
Average length of lease portfolio at the
end of financial year, year 4.2 4,5
Financial performance 2005 2004
Turnover, EUR million 34.8 36.3
Change in value of investment property, EUR million 23.8 10.4
Operating profit, EUR million 49.6 37.5
Gross rental income, EUR million 34.7 36.2
Net rental income, EUR million 25.3 27.0
Net rental yield, % 8.9 9.9
Net rental yield, like-to-like properties, % 9.0 10.0
Market value of property portfolio, EUR million 320.0 292.1
Capital expenditure, EUR million 3.6 1.3
The calculation method for net rental yield is based on the guidelines of the KTI
Institute for Real Estate Economics and the IPD Investment Property Databank.
Like-to-like properties refer to properties held by Citycon through the 12-month
reference period. Properties under development and expansion as well as lots are
eliminated from the figures.
The most significant new lease agreement for the Supermarkets and Shops division
was a lease on the Länsikeskus retail site in Espoo that was agreed on with a new
hypermarket chain in the Helsinki Metropolitan Area.
In 2005, the company divested three investment properties within the Supermarkets
and Shops division for EUR 3.8 million, bringing in total capital gains of EUR
0.3 million.
Property Development Division
The Property Development division's mission is to develop and extend Citycon's
existing and new retail sites together with the company's other divisions. The
division is also responsible for commissioning the construction of new retail
sites - i.e., for acquiring land, for planning negotiations, for liaison with the
authorities and for administering projects, including controlling and developing
the related commercial and functional planning. The division also handles the
marketing and leasing of premises on new retail sites. The division's key figures
are not reported separately because it has no property portfolio or rental
income.
In 2005, the Property Development division engaged in development projects for
more than ten properties, two of them being under construction at the turn of the
year - the Hervanta shopping centre in Tampere and Lippulaiva in Espoo.
Human Resources
At the end of the financial year, Citycon Group had a total of 57 (45) employees,
48 (34) of whom were employed by the parent company.
Wages and salaries paid by the Group totalled EUR 3.1 million (EUR 2.3 million),
of which those paid to managing directors accounted for EUR 0.3 million (EUR 0.3
million) and Board emoluments EUR 0.3 million (EUR 0.2 million). Wages and
salaries paid by the parent company totalled EUR 2.8 million (EUR 1.9 million),
of which those paid to the CEO accounted for EUR 0.2 million (EUR 0.2 million)
and Board emoluments EUR 0.3 million (EUR 0.2 million).
Turnover and Profit
Turnover came to EUR 92.2 million (EUR 84.7 million), of which gross rental
income accounted for 98.5 per cent (98.2 per cent). Operating profit rose to EUR
105.2 million (EUR 51.8 million).
Profit before taxes amounted to EUR 74.2 million (EUR 25.7 million) and after
taxes EUR 59.8 million (EUR 19.9 million). The effect of changes in fair value of
the property portfolio on the year's profit before taxes was EUR 45.9 million.
The period's profit includes one-off expenses of EUR 5.7 million resulting from
premature repayment of the I/1999 subordinated loan. The reported profit is above
the previous year's level, taking account of the above-mentioned items with their
tax effects.
Balance Sheet and Financial Position
The year-end balance-sheet total stood at EUR 983.1 million (EUR 757.7 million),
of which cash and cash equivalents accounted for EUR 15.6 million (EUR 7.9
million). The Group's financial position remained at a healthy level.
Capital expenditure for 2005 totalled EUR 178.5 million (EUR 18.8 million).
The Group's year-end liabilities totalled EUR 622.9 million (EUR 520.0 million),
interest-bearing liabilities growing by EUR 94.0 million to EUR 580.5 million
(EUR 486.5 million) and short-term liabilities accounting for EUR 74.4 million
(EUR 26.1 million).
The interest rate of the interest-bearing liabilities averaged 4.8 per cent (5.1
per cent), if one-off expenses stemming from the premature repayment of the
subordinated loan are excluded. The average loan maturity, weighted according to
loan principals, was 2.7 years (4.0 years), while the average interest-bearing
period was 2.5 years (3.6 years).
The Group's equity ratio was 36.7 per cent (31.4 per cent). Interest cover, or
the previous 12 months' profit before interest expenses, taxes and depreciation
relative to net financial expenses, was 2.3. At year-end, gearing stood at 156.8
per cent (201.3 per cent).
Citycon's year-end interest-bearing liabilities included 87.3 per cent (86.0 per
cent) of floating-rate loans, of which 69.8 per cent (69.1 per cent) had been
converted into fixed-rate ones, based on interest-rate swaps. The overall hedging
rate of the loan portfolio was 58.2 per cent.
On 31 December 2005, the par value of interest rate swaps totalled EUR 336.5
million (EUR 339.4 million) while the market value of derivatives came to EUR
-14.7 million (EUR -18.5 million).
Net financial expenses of EUR 31.1 million (EUR 26.1 million) included EUR 5.7
million in one-off expenses.
Citycon Oyj repaid its I/1999 subordinated loan on 30 June 2005 prior to the
loan's maturity and on 17 June 2005 issued the 1/2005 five-year subordinated loan
of EUR 70 million at a fixed annual nominal interest rate of 4.70 per cent. The
loan's issue price accounted for 99.956 per cent of the nominal loan amount, and
its maturity date is 17 June 2010.
As a consequence of the I/1999 loan's premature repayment and issue of the new
1/2005 subordinated loan, the net savings in Citycon Oyj's financial expenses
will, after taking account of the one-off expense of EUR 5.7 million, come to
approximately EUR 1.5 million over the next four years.
In 2005, Citycon arranged two private placements by issuing shares for selected
international and Finnish institutional investors with the result that the
company's share capital increased by a total of EUR 31.3 million and the number
of shares by a total of 23.2 million new shares. In addition, share subscriptions
based on Citycon's 1999 stock options increased the company's share capital by
EUR 1.4 million. At the end of 2005, the share capital totalled EUR 184.1 million
and shareholders' equity EUR 356.6 million (EUR 237.7 million).
Annual General Meeting 2005
The company's Annual General Meeting (AGM) 2005 held in Helsinki on 5 April
adopted the financial statements of Citycon Oyj and Citycon Group for 2004 and
discharged the Board of Directors and the CEO from liability. The AGM decided
that a per-share dividend of EUR 0.14 be paid for 2004. The dividends were paid
out on 15 April 2005.
Board of Directors
With the number of Board members remaining at eight, the AGM re-elected the
following Board members for a one-year term: Stig-Erik Bergström, Amir Gal, Raimo
Korpinen, Tuomo Lähdesmäki, Carl G. Nordman, Claes Ottosson and Dor J. Segal, and
elected Thomas Wernink, 60, a Dutch citizen, a new member. Timo Kankuri was not
available for re-election. Stig-Erik Bergström acted as Chairman. Tuomo
Lähdesmäki acted as Vice-Chairman until 5 April 2005, succeeded by Thomas
Wernink.
Auditors
The AGM elected Tuija Korpelainen and Mikael Holmström, Authorised Public
Accountants, the company's auditors for financial year 2005, with Ernst & Young
Oy, a firm of authorised public accountants, acting as the deputy auditor.
In addition, the AGM approved Board proposals for amending the Articles of
Association, reducing share capital, selling shares not transferred into the book-
entry securities system, and authorising the Board to decide to increase share
capital.
Amendment to the Articles of Association
The AGM decided to alter Article 3 of the Articles of Association in such a way
that the maximum share capital be EUR 500 million, and Article 12 in such a way
that notice of a shareholders' meeting be published in at least one national
newspaper appearing in Helsinki.
Share-capital reduction
The AGM decided to reduce the company's share capital by EUR 5,229,900 by
cancelling, without consideration, a total of 3,874,000 treasury shares held by
the company. Since this share capital reduction was based on transferring the
amount equalling the cancelled shares' combined nominal value to the share
premium fund, it had no effect on the restricted shareholders' equity. The change
in share capital was registered in the Trade Register on 6 April 2005.
Sale of shares not transferred into the book-entry securities system
The AGM decided to sell all the company's shares in the joint book-entry account
not transferred into the book-entry securities system by 29 April 2006. Shares
not transferred into this system by the above deadline will be sold in public
trading for the benefit of their holders, and the resulting income will be lodged
with the State Provincial Office of Southern Finland on behalf of the holders for
ten years. Following the sale of the shares, shareholders will have the right to
receive an amount of the lodged income in proportion to their holdings against
the share certificate and any proof of title. On 31 December 2005, the joint book-
entry account still had 6,600 Citycon shares, accounting for 0.01 per cent of
company shares.
Authorisation to increase share capital
The AGM authorised the Board to decide by 5 April 2006 to issue one or several
convertible bonds, issue stock options and increase the company's share capital
through one or several rights issues in such a way that the company's share
capital may increase by a maximum of EUR 31,356,004.50 and that a maximum of
23,226,670 new shares at a nominal value of EUR 1.35 may be offered. This
authorisation included a right to waive the shareholders' pre-emptive right.
Citycon's Board of Directors exercised its authorisation given by the AGM to
increase share capital by deciding in 2005 on two private placements totalling
EUR 31.3 million. As a result, the Board has no valid authorisations left.
Share Capital
Under the Articles of Association, Citycon's minimum share capital totals EUR 100
million and maximum share capital EUR 500 million, within which limits the
company may reduce or increase its share capital without altering its Articles of
Association. The company has a single series of shares, with each share entitling
their holder to one vote at the shareholders' meeting.
At the beginning of 2005, Citycon had a share capital of EUR 156,655,833.30 and
the number of shares totalled 116,041,358. The financial year saw Citycon
increase its share capital through stock options and two private placements by a
total of EUR 32,689,791 and reduce it by EUR 5,229,900 by cancelling its own
shares (treasury shares). The table below shows the changes in share capital in
more detail.
Changes in share capital 1 January-31 December 2005
Date Event Change, Change Share No. of
2005 EUR in No. capital, shares
of shares EUR
1 Jan. 156,655,833.30 116,041,358
3 Feb. Increase 124,200.00 92,000 156,780,033.30 116,133,358
(stock options)
6 April
Reduction 5,229,900.00 3,874,000 151,550,133.30 112,259,358
(cancellation of treasury shares)
29 April Increase 49,950.00 37,000 151,600,083.30 112,296,358
(stock options)
21 July Increase 626,845.50 464,330 152,226,928.80 112,760,688
(stock options)
2 Aug.
Increase 16,200,000.00 12,000,000 168,426,928.80 124,760,688
(private placement)
20 Sept. Increase 58,050.00 43,000 168,484,978.80 124,803,688
(stock options)
19 Oct. Increase 255,150.00 189,000 168,740,128.80 124,992,688
(stock options)
26 Oct.
Increase 15,120,000.00 11,200,000 183,860,128.80 136,192,688
(private placement)
20 Dec. Increase 255,595.50 189,330 184,115,724.30 136,382,018
(stock options)
31 Dec. 184,115,724.30 136,382,018
The company's registered year-end share capital came to EUR 184,115,724.30 and
the number of shares totalled 136,382,018, each share bearing a nominal value of
EUR 1.35.
In the end of December 2005, a total of 750,330 shares were subscribed with the
1999 stock options. The share-capital increase equalling these subscriptions will
be entered in the Trade Register in February 2006. After the increase, the
company's registered share capital amounts to EUR 185,128,669.80 and the total
number of shares to 137,132,348.
Private Placements in 2005
In 2005, Citycon arranged two private placements by issuing shares for selected
international and Finnish institutional investors, based on decisions by the
Board of Directors authorised by the AGM of 5 April 2005.
The July private placement for the purpose of partly financing the acquisition of
the Rocca al Mare shopping centre in Tallinn, Estonia, included offering a total
of 12,000,000 new shares for subscription at a per-share price of EUR 3.01. Prior
to the issue, these new shares accounted for around 10.6 per cent of Citycon's
share capital and voting rights conferred by shares, while subsequent to it they
corresponded to about 9.6 per cent. The share issue was carried out through a
book-building process on 25 and 26 July 2005, and was oversubscribed by a factor
of 1.7. A total of 99 per cent of the new shares were allocated to foreign
investors and one per cent to Finnish ones. The resulting increase in share
capital, EUR 16,200,000, was entered in the Trade Register on 2 August 2005, the
new shares having been quoted on the Helsinki Stock Exchange's Main List since 3
August 2005.
The October private placement for the purpose of financing the acquisitions of
the Åkermyntan, Kallhäll and Fruängen retail centres in the Stockholm
Metropolitan Area, as well as future property acquisitions included offering a
total of 11,200,000 new shares for subscription at a per-share price of EUR 3.08.
Prior to the issue, these new shares accounted for around 8.96 per cent of
Citycon's share capital and voting rights conferred by shares, while subsequent
to it they corresponded to about 8.22 per cent. The share issue was carried out
through a book-building process on 19 October 2005, and was oversubscribed by a
factor of 1.7. A total of 99 per cent of the new shares were allocated to foreign
investors and one per cent to Finnish ones. The resulting increase in share
capital, EUR 15,120,000, was entered in the Trade Register on 26 October 2005,
the new shares having been quoted on the Helsinki Stock Exchange's Main List
since 27 October 2005.
More detailed information on these private placements can be found in Citycon's
stock-exchange releases published in July, August and October 2005, available,
for example, at www.citycon.fi.
Shareholders and Shares
Listed on the Helsinki Stock Exchange since 1988, Citycon shares are quoted on
the Main List within the Real Estate industry group under the Financials sector.
The trading code is CTY1S and the trading lot consists of 1,000 shares traded in
euros. The ISIN code used in international securities clearing is FI0009002471.
Shareholders
On 31 December 2005, Citycon had a total of 1,402 (1,175) registered
shareholders. Nominee-registered shareholders, mainly international investors,
held 125.5 million (99.6 million) shares, or 92.0 per cent (85.8 per cent) of
company shares and voting rights. In 2005, the company did not receive any
flagging notifications regarding changes in shareholdings.
Share performance
In 2005, the number of Citycon shares traded on the Helsinki Stock Exchange
totalled 40.7 million (115.1 million) at a total value of EUR 119.2 million (EUR
223.0 million). The highest quotation was EUR 3.50 (EUR 2.65) and the lowest EUR
2.36 (EUR 1.52). The reported trade-weighted average price was EUR 2.95 (EUR
1.94), and the share closed at EUR 3.11 (EUR 2.44). The company's market
capitalisation at the end of the financial year totalled EUR 424.1 million (EUR
273.9 million).
Taxable value of a share
The taxable value of a Citycon share in 2005 is EUR 2.21.
Treasury shares
At the end of the financial year, Citycon Oyj held no treasury shares due to the
decision made by the 2005 AGM to reduce the company's share capital by cancelling
all 3,874,000 treasury shares. The Board of Directors is not authorised to buy
back company shares.
Board and management shareholdings
On 31 December 2005, members of the Board of Directors and the Corporate
Management Committee, the CEO and their related parties held a total of 211,601
Citycon shares, accounting for 0.15 per cent of all shares and the combined
voting rights entitled by the shares.
Stock Options
Citycon has two stock-option schemes in force, the 1999 A/B/C scheme and the 2004
A/B/C scheme. Stock options attached to the 1999 stock-option scheme are listed
on the Helsinki Stock Exchange. These stock-option schemes form part of Citycon's
Group-wide employee incentive and commitment programme.
1999 stock options
The Extraordinary General Meeting (EGM) of 4 November 1999 decided to grant a
maximum of 5,500,000 stock options to Citycon Group employees and Veniamo-Invest
Oy, a Citycon subsidiary, with each stock option entitling its holder to
subscribe for one Citycon share at the par value of EUR 1.35. As a result of
subscriptions, Citycon Oyj's share capital may increase by a maximum of EUR
7,425,000 and the number of shares by a maximum of 5,500,000.
A total of 1,800,000 of the 1999 stock options are labelled under letter A,
1,800,000 under letter B and 1,900,000 under letter C. The subscription period
for A stock options began on 1 September 2000, B stock options on 1 September
2002 and C stock options on 1 September 2004. The subscription price of the
shares based on the stock options is EUR 2 per share less any per-share dividend
paid after 4 November 1999. The subscription price is EUR 1.40 per share after
payment of the dividend for 2005. However, the share-subscription price will
always amount to at least the share's par value of EUR 1.35. The share-
subscription period for all stock options will expire on 30 September 2007.
During 2005, the total number of stock options, based on the 1999 stock-option
scheme, traded on the Helsinki Stock Exchange came to 2.8 million, their value
totalling EUR 4.4 million. The highest quotation was EUR 2.09 and the lowest EUR
0.88. During the financial year, the number of new Citycon shares subscribed on
the basis of the 1999 stock-option scheme totalled 1,672,990 at the per-share
subscription price of EUR 1.40. These shares will entitle their holders to a
dividend for the financial year 2005. Other shareholder entitlements will take
effect as of the date of registration of the share-capital increase. Each share
entitles its holder to one vote.
In 2005, the company's share capital increased by a total of EUR 1,369,791, based
on the 1999 stock options. Under the 1999 stock-option scheme, the remaining
stock options entitle their holders to subscribe for a total of 3,471,510 new
company shares. In view of the 750,330 shares subscribed in December 2005, the
company's share capital may increase by a further EUR 5,699,484 on the basis of
the stock options.
2004 stock options
The AGM of 15 March 2004 decided to grant a maximum of 3,900,000 stock options to
the employees of Citycon Oyj and its subsidiaries and Citycon Oyj's wholly owned
subsidiary. As a result of subscriptions, Citycon Oyj's share capital may
increase by a maximum of EUR 5,265,000 and the number of shares by a maximum of
3,900,000.
A total of 1,300,000 of the 2004 stock options are labelled under letter A,
1,300,000 under letter B and 1,300,000 under letter C. The subscription period
for A stock options will begin on 1 September 2006, B stock options on 1
September 2007 and C stock options on 1 September 2008. The subscription price of
the shares based on the stock options is determined by the trade-weighted average
price quoted on the Helsinki Stock Exchange for the 2004A stock options between 1
and 30 April 2004, for the 2004B stock options between 1 and 30 April 2005 and
for the 2004C stock options between 1 and 30 April 2006, plus 20 per cent. The
share-subscription price will, as per the dividend record date, be reduced by 50
per cent of the amount of the per-share dividend paid after the beginning of the
subscription-price determination period but before share subscription. However,
the share-subscription price will always amount to at least the share's par
value. The per-share subscription price is EUR 2.44 for the 2004A stock options
and EUR 2.91 for the 2004B stock options after payment of the dividend for 2005.
Based on a Board decision on 26 May 2004, the number of 2004A stock options
granted to Group staff totals 1,135,000 and to Veniamo-Invest Oy 165,000. Some of
the employee stock options have returned to Veniamo-Invest Oy, as stipulated in
the terms and conditions of the stock-option scheme. On 31 December 2005, Group
staff held a total of 1,040,000 2004A stock options.
On 13 September 2005 and 18 October 2005, the Board of Directors decided to issue
a total of 1,195,000 2004B stock options to Group employees. Veniamo-Invest Oy,
the issuer of these stock options, retains 105,000 2004B stock options and
1,300,000 2004C stock options, which it may, upon a Board decision, issue to
current and future Citycon employees.
The subscription period is between 1 September 2006 and 31 March 2009 for 2004 A
stock options, between 1 September 2007 and 31 March 2010 for 2004B stock options
and between 1 September 2008 and 31 March 2011 for 2004C stock options.
Management stock options
On 31 December 2005, Citycon's CEO held 1,000,000 1999A/B/C stock options,
150,000 2004A stock options and 140,000 2004B stock options while other members
of the Corporate Management Committee held 350,670 1999A/B/C stock options,
300,000 2004A stock options and 385,000 2004B stock options.
Events after the Financial Year
On 16 January 2006, the company acquired the remaining 26 per cent holding in the
Myyrmanni shopping centre and in addition to that the Valtari shopping centre in
Kouvola at a debt-free purchase price of approx. EUR 37 million. Consequently,
Citycon's holdings in these properties are now 100 per cent.
In addition, on 1 February 2006, the company purchased Tullintori shopping centre
in the Tampere city centre. The acquisition comprised 57.4 per cent of the shares
in the real estate company Kiinteistö Oy Tullintori. The total debt-free purchase
price of the shares was EUR 8.7 million.
Board Proposal for Dividend Payment
The Board of Directors proposes to the Annual General Meeting of 14 March 2006
that a per-share dividend of EUR 0.14 be paid out for the financial year ending
on 31 December 2005, that the record date for dividend payment be 17 March 2006
and that the dividend be paid on 24 March 2006.
Future Outlook
Citycon expects demand, occupancy rates and rents for its retail properties to
remain stable in the Helsinki Metropolitan Area and Finland's major cities. In
this increasingly intensified competitive environment, the company continues to
seek opportunities to expand its business in Finland, Scandinavia and the Baltic
countries.
Due to favourable market prospects and the acquisitions and extension projects
carried out during 2005, the company expects to grow its business and operational
results.
Helsinki, 9 February 2006
Citycon Oyj
Board of Directors
Citycon and IFRS
Citycon Oyj has adopted IAS/IFRS (International Financial Reporting Standards)
for its interim reports and financial statements for 2005.
Consolidated income statement
EUR million 10-12 10-12 1-12 % 1-12 %
2005 2004 2005 2004
Turnover 25.7 21.4 92.2 100,0 84.7 100.0
Other income 0.1 0.5 0.3 0,3 0.7 0.8
Profit on sale of
investment property 0.0 0.1 0.3 0.3 0.1 0.1
Change in value of
investment property 29.9 -5.7 45.9 49.8 -5.7 -6.7
Expenses
Depreciation and impairments 0.0 0.1 0.2 0.2 0.3 0.3
Other expenses 9.4 7.1 33.3 36.1 27.7 32.7
Operating profit 46.4 9.1 105.2 114.1 51.8 61.2
Net financial expenses 5.6 6.6 31.1 33.7 26.1 30.8
Profit before taxes 40.8 2.5 74.2 80.4 25.7 30.4
Taxes -6.0 -1.3 -14.4 -15.6 -5.9 -7.0
Profit 34.8 1.2 59.8 64.8 19.9 23.4
Profit attributable to:
Shareholders of the
parent company 34.3 1.2 59.2 19.9
Minority interests 0.5 0.0 0.6 0.0
Total 34.8 1.2 59.8 19.9
Earnings per share, EUR 0.26 0.01 0.49 0.19
Earnings per share,
diluted, EUR 0.25 0.01 0.49 0.19
Consolidated balance sheet
EUR million 31 Dec. 2005 31 Dec. 2004
Assets
Non-current assets
Intangible assets 0.2 0.2
Tangible assets 0.7 0.6
Investment properties 956.6 738.7
Investments 0.1 0.0
Deferred tax assets 0.0 6.1
Non-current assets, total 957.6 745.6
Current assets
Short-term receivables 9.9 4.2
Cash and cash equivalents 15.6 7.9
Current assets, total 25.5 12.2
Assets, total 983.1 757.7
Liabilities and shareholders' equity
Equity attributable to equity
holders of the parent
Share capital 184.1 156.8
Share issue 1.1 0.0
Share premium fund 78.8 35.0
Treasury shares -4.7
Fair value reserve -10.5 -13.3
Other funds 6.6 6.6
Retained profits 37.4 37.5
Profit 59.2 19.9
Shareholders' equity, total 356.6 237.7
Minority interest 3.6 0.0
Liabilities
Long-term liabilities 542.7 493.9
Deferred tax liabilities 5.8 0.0
Long-term liabilities, total 548.4 493.9
Short-term liabilities 74.4 26.1
Liabilities, total 622.9 520.0
Liabilities and shareholders'
equity, total 983.1 757.7
Statement of changes in shareholders' equity
EUR million
Share Share Share premium Fair value Treasury
capital issue fund and ot- reserve shares
her reserves
Shareholders' equity
1 Jan. 2004 142.8 0.0 34.8 -7.7 -4.7
Cash flow hedges -5.6
Profit
Total recognised income
and expense -5.6
Dividends
Shares issued 13.5 6.7
Shares subscribed based
on warrants 0.5 0.1
Shareholders' equity
31 Dec. 2004 156.8 0.0 41.5 -13.3 -4.7
Shareholders' equity
1 Jan. 2005 156.8 0.0 41.5 -13.3 -4.7
Change in share capital -5.2 5.2 4.7
Cash flow hedges 2.8
Profit
Total recognised income
and expense 2.8
Dividends
Shares issued 31.6 38.6
Shares subscribed based
on warrants 1.0 1.1
Other changes
Shareholders' equity
31 Dec. 2005 184.1 1.1 85.4 -10.5 0.0
Statement of changes in shareholders' equity
EUR million
Equity
attributable
to equity Shareholders'
Retained holders Minority equity,
profits of the parent interests total
Shareholders' equity
1 Jan. 2004 51.7 217.0 0.0 217.0
Cash flow hedges -5.6 -5.6
Profit 19.9 19.9 19.9
Total recognised income
and expense 19.9 14.2 14.2
Dividends -14.3 -14.3 -14.3
Shares issued 20.2 20.2
Shares subscribed based
on warrants 0.0 0.6 0.6
Shareholders' equity
31 Dec. 2004 57.4 237.7 0.0 237.7
Shareholders' equity
1 Jan. 2005 57.4 237.7 0.0 237.7
Change in share capital -4.7 0.0 0.0
Cash flow hedges 2.8 2.8
Profit 59.2 59.2 0.6 58.9
Total recognised income
and expense 59.2 61.9 61.0
Dividends -15.7 -15.7 -15.7
Shares issued 70.2 70.2
Shares subscribed based
on warrants 0.2 2.3 2.3
Other changes 0.2 0.2 3.0 3.2
Shareholders' equity
31 Dec. 2005 96.5 356.6 3.6 360.2
Cash flow statement
EUR million 1-12 2005 1-12 2004
Operating activities
Profit before taxes 74.2 25.7
Adjustments:
Profit on sale of investment property -0.3 -0.1
Change in value of investment property -45.9 5.7
Depreciation and impairments 0.2 0.3
Financial income and expenses 31.1 26.1
Other adjustments 0.9 0.0
Cash flow before change in working capital 60.1 57.7
Change in working capital 1.9 -0.2
Cash flow from operating activities before
financial items and taxes 62.0 57.5
Interest paid and payments for other
financial expenses of operating activities -32.3 -28.0
Dividend and interest received from
business operations 0.4 0.8
Taxes paid -5.2 -4.2
Cash flow from operating activities (A) 24.8 26.1
Investing activities
Investments in tangible and intangible assets -7.2 -10.8
Shares in subsidiaries purchased -92.6 -8.8
Shares in subsidiaries sold 0.0 0.8
Shares in associated companies sold 2.8 0.0
Other investments sold 1.0 0.1
Cash flow from investing activities (B) -96.1 -18.7
Financial activities
Share issue 74.4 20.8
Fund payments from minority interest 0.0 0.1
Withdrawals of short-term loans 134.6 18.2
Repayments of short-term loans -108.6 -18.1
Withdrawals of long-term loans 199.7 414.9
Repayments of long-term loans -205.6 -435.7
Dividend paid and other distribution of profit -15.7 -14.3
Cash flow from financial activities (C) 78.9 -14.1
Increase in cash and cash equivalents(A+B+C)
increase (+)/decrease (-) 7.7 -6.7
Cash and cash equivalents at the beginning of period 7.9 14.7
Cash and cash equivalents at the end of period 15.6 7.9
Segment reporting
EUR million 10-12 2005 10-12 2004 1-12 2005 1-12 2004
Turnover
Shopping Centres 16.7 12.6 57.4 48.4
Supermarkets and Shops 9.0 8.9 34.8 36.3
Unallocated 0.0 0.0 0.0 0.0
Total 25.7 21.4 92.2 84.7
Operating profit
Shopping Centres 19.0 -5.9 61.2 18.8
Supermarkets and Shops 28.4 16.7 49.6 37.5
Unallocated -1.0 -1.7 -5.5 -4.4
Total 46.4 9.1 105.2 51.8
Key financial figures
1-12 2005 1-12 2004
Earnings per share, EUR 0.49 0.19
Earnings per share, diluted, EUR 0.49 0.19
Equity per share, EUR 2.60 2.12
Return on equity (ROE), % 22.5 9.5
Return on investment (ROI), % 13.5 7.2
Equity ratio, % 36.7 31.4
Consolidated contingent liabilities
EUR million 31 Dec. 2005 31 Dec. 2004
Mortgages on land and buildings 7.8 2.4
Group company shares pledged 0.0 0.0
Other pledged shares 0.0 0.0
Other pledges given 0.0 0.0
Group's derivatives
EUR million 31 Dec. 2005 31 Dec. 2004
Par values Fair values Par values Fair values
Interest-rate derivatives
Interest-rate swaps
Maturing in 2007 78.2 -0.1 78.2 -0.5
Maturing in 2008 50.0 -1.5 50.0 -2.2
Maturing in 2009 125.3 -6.3 128.2 -7.9
Maturing in 2010 83.0 -6.8 83.0 -7.9
Total 336.5 -14.7 339.4 -18.5
The fair values for derivatives describe their value if all agreements had been
closed at the market price of the end of period.
Derivatives have been used for hedging the loan portfolio.
The accrued interest for the period included in the derivatives' fair values,
being EUR 0.5 million (EUR 0.6 million) has been booked in interest expenses.
Summary of effects of IFRS on profit
EUR million
10-12/2004 1-12/2004
Profit FAS 4.6 17.4
IAS 40 Change in valuation of investment property -3.7 1.7
IAS 12 Change in deferred tax assets and liabilities 0.5 1.0
IAS 39 Change in values of interest rate derivatives -0.2 -0.2
Other changes 0.0 0.0
Changes total -3.4 2.4
Profit IFRS 1.2 19.9
Summary of effects of IFRS on shareholders' equity
EUR million
1 Jan.2004 31 Dec.2004
Shareholders' equity FAS 278.0 302.0
IAS 40 Change in valuation of investment properties 15.3 16.9
IAS 39 Change in values of interest rate derivatives -10.9 -18.3
IAS 32 Reclassification of treasury shares -4.7 -4.7
IAS 32 Reclassification of capital loan -68.5 -68.5
IAS 12 Change in deferred tax assets and liabilities 7.9 10.4
Other changes -0.1 -0.2
Changes total -61.0 -64.3
Shareholders' equity IFRS 217.0 237.7
The above table illustrating the effect of IFRS on the shareholders' equity
differs from the preliminary information on the effects of the IFRS adoption
reported earlier by the company, due mainly to a change in accounting principles
governing deferred tax liabilities. Previously, the wholly owned, domestic real
estate companies' deferred tax liability was calculated on the temporary
difference between the non-depreciated cost of these companies' properties for
tax purposes and their fair value. In the financial statements for 2005, these
companies' deferred tax liability is calculated on the temporary difference
between the debt-free cost of these companies' shares and their fair value. The
figures for the comparison period were changed to comply with the new accounting
practice.
The figures are unaudited.
Financial Reports in 2006
Citycon will publish its Annual Report for 2005 on its website during week 9. The
printed version will be issued in week 10.
In 2006, the company will publish three interim reports as follows:
January-March 2006 on Thursday, 27 April
January-June 2006 on Friday, 21 July
January-September 2006 on Thursday, 19 October
Annual General Meeting
Citycon will hold its Annual General Meeting at Finlandia Hall, Helsinki
Auditorium, Mannerheimintie 13e, Helsinki, Finland, on Tuesday 14 March 2006,
starting at 2.00 p.m.
For further information for investors, please visit Citycon's website,
www.citycon.fi.
For further information, please contact:
Petri Olkinuora, CEO
Tel. +358 9 6803 6738 or +358 400 333 256
petri.olkinuora@citycon.fi
Eero Sihvonen, CFO
Tel. +358 9 6803 6730 or +358 50 557 9137
eero.sihvonen@citycon.fi
Distribution:
Helsinki Stock Exchange
Major media
www.citycon.fi