PRELIMINARY INFORMATION OF TRANSITION TO INTERNATIONAL FINANCIAL
REPORTING STANDARDS (IFRS)
Citycon will report its financial statements for the financial year
2005 according to International Financial Reporting Standards (IFRS).
The purpose of this release is to present the major impacts of the
transition from Finnish Accounting Standards (FAS) to IFRS.
This release covers the preliminary opening IFRS balance as of 1
January 2004 and the preliminary comparative information for the
first and second quarters of 2004. For the third quarter of 2004 the
comparative IFRS figures will be reported in connection with the FAS
interim financial reporting and for the full year 2004 in connection
of the year-end reporting. The final reconciliation required by IFRS 1
(First-time adoption of IFRS) will be presented in the interim report
for the first quarter of 2005 as Citycon starts reporting according to
IFRS for the first time.
The opening IFRS balance sheet and the comparative information for the
first and second quarters have been prepared in accordance with the
latest versions of IFRS. The note -column refers to the additional
information explained in the separate section. A summary of Citycon's
most significant IFRS accounting principles is included in this
release.
The figures are unaudited.
Preliminary summary of effects of IFRS on shareholders' equity on as
per 1 January 2004
EUR million
Shareholders' equity FAS 31 December 2003 278.0
IAS 40 Change in valuation of investment properties +16.0
IAS 31 Change in consolidation of mutual real estate companies
IAS 39 Change in values of interest rate derivatives -10.9
IAS 32 Reclassification of treasury shares -4.7
IAS 32 Reclassification of capita loan -68.5
IAS 12 Change in deferred tax assets and liabilities -7.7
Shareholders' equity IFRS 1 January 2004 202.2
Key financial figures
FAS IFRS FAS IFRS FAS IFRS
Q1 Q1 Q2 Q2 Q2 Q2
Cum. Cum.
Earnings per share,
EUR 0.04 0.08 0.04 0.06 0.08 0.14
Earnings per share,
diluted, EUR 0.04 0.08 0.04 0.06 0.08 0.14
Equity per share, EUR 1.91 1.88 1.95 1.99 1.95 1.99
Return on equity
(ROE), % 8.4 17.5 8.6 12.7 8.5 14.8
Return on investment
(ROI), % 6.0 7.6 6.2 7.7 6.1 7.7
Equity ratio, %, note g 35.6 25.6 36.2 27.1 36.2 27.1
Preliminary IFRS opening balance sheet reconciliation as of 1 January
2004
EUR million Note FAS IFRS Prel. IFRS
31 Dec. change 1 Jan.
2003 2004
Assets
Non current assets
Intangible assets 4.5 -4.3 0.2
Tangible assets 729.0 -727.6 1.5
Investment properties a 726.3 726.3
Investments
Holdings in associated
Companies b 55.5 -55.5
Treasury shares c 4.7 -4.7
Other investments 23.1 -21.8 1.3
Investments, total 83.3 -82.0 1.3
Deferred tax assets d
Non current assets, total 816.9 -87.6 729.3
Current assets
Short-term receivables 3.4 -0.5 2.9
Cash and cash equivalents 15.1 -0.4 14.7
Current assets, total 18.5 -0.9 17.5
Assets, total 835.3 -88.5 746.8
Liabilities and shareholders' equity
Equity attributable to
equity holders of the parent
Share capital 142.8 142.8
Share premium fund 28.3 28.3
Treasury share fund c 4.7 -4.7
Treasury shares c -4.7 -4.7
Fair value reserve e -7.7 -7.7
Other funds 6.6 6.6
Retained profits a,b,d 13.0 9.7 22.7
Profit 14.3 14.3
Capital loan f 68.5 -68.5
Shareholders' equity, total 278.0 -75.8 202.2
Minority interest 99.8 -99.8
Liabilities
Long-term liabilities f 428.3 79.4 507.8
Deferred tax liability d 7.7 7.7
Long-term liabilities, total 428.3 87.1 515.5
Short-term liabilities 29.2 29.2
Current tax liability
Short-liabilities, total 29.2 29.2
Liabilities, total 457.5 87.1 544.6
Liabilities and shareholders'
equity, total 835.3 -88.5 746.8
Preliminary IFRS Q1 2004 comparison
Income statement
EUR million Note FAS Change Prel. IFRS
Q1 Q1 Q1
Turnover 21.9 -0.9 21.0
Other Income
Change in value of
investment property a
Expenses
Depreciation and
impairments 1.8 -1.8
Share of associated
companies' profit b 0.1 -0.1
Other expenses 7.8 -0.7 7.1
Operating profit 12.2 1.7 13.9
Net financial expenses 6.5 6.5
Profit before taxes 5.7 1.7 7.4
Taxes d -1.6 2.6 1.0
Profit 4.1 4.3 8.4
Earnings per share, EUR 0.04 0.04 0.08
Earnings per share, diluted, EUR 0.04 0.04 0.08
Preliminary IFRS Q2 2004 comparison
Income statement
EUR million Note FAS Change Prel. FAS Change Prel.
Q2 Q2 IFRS Q2 Q2 IFRS
Q2 Cum. Cum. Cum.
Turnover 22.1 -0.9 21.2 44.0 -1.8 42.2
Other income 0.1 -0.1 0.1 -0.1
Change in value of
investment property a
Expenses
Depreciation and
impairments 2.0 -2.0 3.8 -3.8
Share of associated
companies' profit b 0.2 -0.2
Other expenses 7.9 -0.3 7.6 15.7 -1.0 14.7
Operating profit 12.3 1.3 13.6 24.5 3.0 27.5
Net financial expenses 6.4 6.4 12.9 12.9
Profit before taxes 5.9 1.3 7.2 11.6 3.0 14.6
Taxes d -1.7 0.9 -0.8 -3.3 3.5 0.2
Profit 4.2 2.2 6.3 8.4 6.2 14.6
Earnings per share,
EUR 0.04 0.02 0.06 0.08 0.06 0.14
Earnings per share,
diluted, EUR 0.04 0.02 0.06 0.08 0.06 0.14
Preliminary IFRS Q1, Q2 2004 comparison
Balance sheet
EUR million Note FAS Change Prel. FAS Change Prel.
31 Mar. IFRS 30 Jun. IFRS
2004 31 Mar. 2004 30 Jun.
2004 2004
Assets
Non-current assets
Intangible assets 4.7 -4.3 0.4 4.8 -4.4 0.4
Tangible assets 739.4 -738.0 1.3 740.0 -738.9 1.1
Investment
properties a 735.4 735.4 737.5 737.5
Investments
Holdings in associated
companies b 55.4 -55.4 55.4 -55.4
Treasury shares c 4.7 -4.7 4.7 -4.7
Other investments 21.4 -21.4 21.4 -20.2 1.2
Investments, total 81.5 -81.5 81.5 -80.3 1.2
Deferred tax
asset d
Non-current assets,
total 825.6 -88.4 737.1 826.3 -86.0 740.3
Current assets
Short-term receivables 3.6 -0.5 3.1 3.1 -0.5 2.7
Cash and cash equivalents 7.2 -0.5 6.7 4.8 -0.5 4.3
Current assets, total 10.8 -1.0 9.8 7.9 -1.0 7.0
Assets, total 836.4 -89.5 746.9 834.2 -87.0 747.2
Liabilities and shareholders' equity
Equity attributable to
equity holders' of the parent
Share capital 142.8 142.8 142.8 142.8
Share premium fund 28.3 28.3 28.3 28.3
Treasury share
fund c 4.7 -4.7 4.7 -4.7
Treasury share
reserve c -4.7 -4.7 -4.7 -4.7
Fair value reserve e -12.4 -12.4 -7.6 -7.6
Other funds 6.6 6.6 6.6 6.6
Retained profits a,b,d 13.0 9.6 22.6 13.0 9.6 22.6
Profit 4.1 4.3 8.4 8.4 6.2 14.6
Capital loan f 68.5 -68.5 68.5 -68.5
Shareholders' equity,
total 267.8 -76.3 191.5 272.1 -69.5 202.6
Minority interest 101.2 -101.2 101.2 -101.2
Liabilities
Long-term
liabilities f 433.1 85.1 518.2 426.5 79.0 505.5
Deferred tax
liability d 3.1 3.1 4.8 4.8
Long-term liabilities,
total 433.1 88.2 521.3 426.5 83.8 510.3
Short-term liabilities 34.1 -0.1 34.0 34.4 -0.1 34.3
Short-term liabilities,
total 34.1 -0.1 34.0 34.4 -0.1 34.3
Liabilities, total 467.3 88.0 555.3 460.9 83.7 544.6
Liabilities and share-
holders' equity, total 836.4 -89.5 746.9 834.2 -87.0 747.2
Preliminary statement of changes in shareholders' equity
Attributable to equity holders of parent
EUR million Share Share Fair Treasury Retained Total
capital premium value shares profits equity
fund reserve and
and capital
other loan
reserves
FAS balance
31 Dec. 2003 142.8 34.8 73.1 27.3 278.0
IFRS balance
1 January 2004 142.8 34.8 -7.7 -4.7 36.9 202.2
Cash flow hedges -4.7 -4.7
Profit 8.4 8.4
Total recognised
income and expense -4.7 8.4 3.6
Dividends -14.3 -14.3
IFRS Balance
31 March 2004 142.8 34.8 -12.4 -4.7 31.0 191.5
Cash flow hedges 4.8 4.8
Profit 6.3 6.3
Total recognised
income and expense 4.8 6.3 11.1
IFRS Balance
30 June 2004 142.8 34.8 -7.6 -4.7 37.3 202.6
Cash flow statements
Cash flow statements are not presented, as the differences between
IFRS cash flow statement and the cash flow statement prepared
according to Finnish Accounting Standards are not considered to be
material.
Notes to the preliminary opening IFRS balance sheet reconciliation and
comparative financial information for Q1 and Q2 in 2004
a) Investment properties have been valued at fair value and the change
in values has been recorded income statement (and the equity in the
opening balance).
b) Consolidation principles of mutual real estate companies have been
changed.
c) Own shares held by the parent company are not presented in assets,
but are deducted from equity.
d) Deferred tax has been calculated from IFRS adjustments.
e) The fair value of cash flow hedging derivatives has been included
in the balance sheet and the changes in the values in cash flow hedge
reserve in equity.
f) Capital loan has been classified as a liability in the IFRS balance
sheet.
g) The covenant calculation used in the financial agreements will
remain the same.
Summary of Citycon's most significant IFRS accounting principles
The consolidated financial statements for 2005 of Citycon are to be
prepared in accordance with International Financial Reporting
Standards (IFRS). The comparative figures of 2004 are restated from
previous applied Finnish Accounting Standards (FAS) to IFRS.
Principles of consolidation
Mutual real estate companies are consolidated by proportional
consolidation, where Citycon's share of assets, liabilities, income
and expenses of the company is combined line by line with similar
items in the Citycon's financial statements.
Investment properties
Investment property is property (land or building or part of a
building or both) held to earn rental income or capital gain or
both. In the valuation of investment properties according to IAS 40
Citycon has decided to use the fair value model, which will result in
changes in value being posted to the income statement. The valuation
of investment properties is assessed in accordance with International
Valuation Standards (IVS) at least once a year by on external valuer.
Property, plant and equipment
Property (other than investment property), plant and equipment are
recorded at historical cost and depreciated over the estimated
economic lives of the assets. Machinery and equipment is depreciated
over a period of from 4 to 10 years.
Intangible assets
Intangible assets include software licenses. They are recorded at cost
and amortised on straight-line basis over 5 years.
Impairment
Property, plant and equipment and intangible assets are assessed at
each balance sheet date to determine whether there is any indication
of impairment. If such indication exists, the recoverable amount shall
be estimated. An impairment loss is recognised in the income statement
if the carrying amount exceeds the recoverable amount.
Revenue recognition
Revenue comprise mainly of rental income from investment property.
Rental income is recognised on a straight-line basis over the term of
the lease.
Leases
Leases, for which Citycon acts as a lessee, are classified as finance
leases and recognised as assets and liabilities if the risks and
rewards have been transferred. A lease is classified as an operating
lease if it does not transfer substantially all the risks and rewards
incidental to ownership.
Pension benefits
Employee pension cover has been arranged through statutory pension
insurance. The contributions to defined contribution plans are charged
to the income statement in the period to which they relate.
Equity and equity-related compensation benefits
IFRS 2 Share-based payment -standard has been applied to share options
that were granted after 7 November 2002 and have not vested before 1
January 2005. For such option plans the fair value of the equity
instruments granted is measured at grand date and the options are
expensed over the vesting period of the instrument.
Capital loan
The capital loan is treated under IFRS as a liability.
Reacquired own equity instruments (treasury shares)
Treasury shares are deducted from the shareholders' equity.
Derivatives
Interest rate derivatives are used as hedging instruments. They are
designated as cash flow hedges of the future interest payments on
variable rate liabilities. Hedging instruments are measured at fair
value and the change in value that relates to the effective part of
the hedge is recognised directly in equity. The ineffective part, if
any, is recognised in the income statement. Fair value changes remain
in equity until the hedged cash flow is recognised.
Provisions
Provisions are recognised, when the group has a present legal or
constructive obligation as a result of past events, when it is
probable that an outflow of resources will be required to settle the
obligation and when a reliable estimate of the amount can be made.
Taxes
Income taxes include taxes based on taxable profit for the financial
period, adjustments to prior year taxes and change in deferred taxes.
Deferred tax assets and liabilities are recognised using the liability
method for all temporary differences arising from the difference
between the tax basis of assets and liabilities and their carrying
values in IFRS. The enacted tax rate is used in the determination of
deferred income tax.
Helsinki, 31 August 2004
Citycon Oyj
Board of Directors
Further information
CEO Petri Olkinuora
Tel. +358 9 6803 6738 or +358 400 333 256
petri.olkinuora@citycon.fi
CFO Pirkko Salminen
Te. +358 9 6803 6730 or + 358 50 3022 485
pirkko.salminen@citycon.fi
Distribution
Helsinki Exchanges
Main media
www.citycon.fi
Independent Auditors' Review Report to the Board of Directors of
Citycon Oyj
We have reviewed the preliminary opening balance as of January 1 2004
and the preliminary comparative information for the first and second
quarters of 2004, which have been prepared in accordance with
International Financial Reporting Standards (IFRS). These statements
are the responsibility of the management.
We conducted our review in accordance with the International Standard
on Auditing applicable to review engagements. This standard requires
that we plan and perform the review to obtain moderate assurance as to
whether the financial statements are free of material misstatement. A
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 review, nothing has come to our attention that causes us
to believe that the preliminary opening balance sheet as of January 1
2004 and the preliminary comparative information for the first and
second quarters of 2004 do not include the major adjustments between
Finnish Accounting Standards and IFRS.
Helsinki, August 31, 2004
Ari Ahti Jaakko Nyman
Authorized Public Accountant Authorized Public Accountant