Citycon H1/2019: Stable overall performance
Citycon Oyj Stock Exchange Release 11 July 2019 at 09:00 hrs
-Solid first half of the year
-Growth in tenant sales and footfall
-Net rental income and EPRA earnings continued to grow
-Occupancy remained at a high level; positive leasing spread continued
-Two shopping centres successfully divested during Q2/2019
-Outlook specified after stable half-year performance and completed disposals
APRIL—JUNE 2019
- Net rental income was EUR 56.1 million (Q2/2018: 54.3). Development project in Mölndal coming online increased net rental income by EUR 1.5 million, which was offset by planned divestments in 2018 and Q2/2019, impacting net rental income by EUR 1.1 million. Weaker currencies had an impact of EUR -0.6 million. Adoption of IFRS 16 standard increased net rental income in Q2/2019 by EUR 1.8 million in total.
- EPRA Earnings excluding the one-time expenses related to organizational changes increased to EUR 39.2 million or EUR 0.220 per share. Reported EPRA Earnings increased to EUR 38.7 million (36.4) as result of higher net rental income, lower net financial expenses and the adoption of IFRS 16 standard. EPRA Earnings per share (basic) was EUR 0.217 (0.205), impact from weaker currencies was EUR -0.002 per share.
- IFRS-based earnings per share was EUR 0.04 (0.00) as a result of higher net rental income and higher other operating income and expenses.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. Please see Note 2 for more information.
JANUARY—JUNE 2019
- Net rental income was EUR 109.7 million (H1/2018: 107.6). Completed (re)development projects increased NRI by EUR 2.6 million, while divestments decreased net rental income by EUR 2.9 million and weaker SEK and NOK by EUR 1.2 million. Adoption of IFRS 16 standard increased net rental income in H1/2019 by EUR 3.5 million in total.
- EPRA Earnings excluding the one-time expenses related to organizational changes increased to EUR 76.1 million or EUR 0.427 per share. Reported EPRA Earnings was EUR 74.5 million (72.5) due to higher net rental income and lower net financial expenses. EPRA Earnings per share (basic) was EUR 0.418 (0.407), negative impact from weaker currencies was EUR 0.006.
- IFRS-based earnings per share was EUR 0.12 (0.11) as a result of higher net rental income, lower net financial expenses and higher other operating income and expenses.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. Please see Note 2 for more information.
KEY FIGURES
| Q2/2019 | Q2/2018 | % 1) | Comparable change % 3) | ||
| Net rental income | MEUR | 56.1 | 54.3 | 3.3 % | 4.4 % |
| Direct Operating profit 2) | MEUR | 50.7 | 48.4 | 4.9 % | 6.0 % |
| IFRS Earnings per share (basic) 4) | EUR | 0.04 | 0.00 | - | - |
| Fair value of investment properties | MEUR | 4,149.8 | 4,140.8 | 0.2 % | - |
| Loan to Value (LTV) 2) | % | 48.9 | 47.0 | 4.1 % | - |
| EPRA based key figures 2) | Q2/2019 | Q2/2018 | % 1) | Comparable change % 3) | |
| EPRA Earnings | MEUR | 38.7 | 36.4 | 6.1 % | 7.7 % |
| EPRA Earnings per share (basic) 4) | EUR | 0.217 | 0.205 | 6.1 % | 7.7 % |
| EPRA NAV per share 4) | EUR | 12.77 | 13.42 | -4.9 % | - |
| Q1-Q2/2019 | Q1-Q2/2018 | % 1) | Comparable change % 3) | 2018 | ||
| Net rental income | MEUR | 109.7 | 107.6 | 2.0 % | 3.1 % | 214.9 |
| Direct Operating profit 2) | MEUR | 98.4 | 95.8 | 2.7 % | 3.9 % | 187.6 |
| IFRS Earnings per share (basic) 4) | EUR | 0.12 | 0.11 | 7.5 % | 12.3 % | 0.09 |
| Fair value of investment properties | MEUR | 4,149.8 | 4,140.8 | 0.2 % | - | 4,131.3 |
| Loan to Value (LTV) 2) | % | 48.9 | 47.0 | 4.1 % | - | 48.7 |
| EPRA based key figures 2) | Q1-Q2/2019 | Q1-Q2/2018 | % 1) | Comparable change % 3) | 2018 | |
| EPRA Earnings | MEUR | 74.5 | 72.5 | 2.7 % | 4.4 % | 143.5 |
| EPRA Earnings per share (basic) 4) | EUR | 0.418 | 0.407 | 2.7 % | 4.4 % | 0.806 |
| EPRA NAV per share 4) | EUR | 12.77 | 13.42 | -4.9 % | - | 12.95 |
1) Change from previous year. Change-% is calculated from exact figures.
2) Citycon presents alternative performance measures according to the European Securities and Markets Authority (ESMA) new guidelines. More information is presented in Basis of Preparation and Accounting Policies in the notes to the accounts.
3) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.
4) Key ratios have been adjusted in the comparison periods to reflect the new number of shares after the reversed share split executed in March 2019.
CEO F. SCOTT BALL:
"Citycon’s operational performance remained solid and the total net rental income grew to EUR 109.7 million during the first half of 2019. Like-for-like net rental income grew over 2018 and we were pleased to see a stable like-for-like development in Finland after many subdued years. EPRA earnings continued to grow and the EPRA EPS reached EUR 0.418 during January-June 2019. The occupancy rate also remained stable at the high level of 95.6%.
We continued to take steps to further strengthen our asset management during January-June 2019. We introduced a new organization in the first quarter of the year and the onboarding continued during the second quarter. This new organization provides consistency across the countries and enables us to intensify our asset management efforts. I am also pleased that we strengthened our team with several key recruitments during the quarter, including Erik Lennhammar, who will join our Corporate Management Committee in August 2019 as the new Chief Development Officer. He will be a great addition to our team thanks to his broad background in asset management and property development in various sectors. Together with the strengthened development team, we will begin to exploit the various densification opportunities within our portfolio.
Citycon once again received recognition for the Iso Omena shopping centre during the second quarter. In April, this project was awarded the best large shopping centre expansion project in Europe by the International Council of Shopping Centres and in June, it was awarded the best shopping centre in the Nordics by the Nordic Council of Shopping Centres. Iso Omena is the prototype of the type of asset we want to own in the future. Further, these recognitions are a great acknowledgement of our strategy and of our development capabilities. In particular, the service square in Iso Omena, which combines a range of the City of Espoo’s municipal services from a library to medical services, has received praise from visitors and also several global acknowledgements. In May, we announced that a similar service square concept will be launched later this year in our shopping centre Trio in Lahti, Finland. The service square will be a great addition to the shopping centre and we are confident it will drive further footfall to the centre. It is also a great example of our intensified focus on asset management.
We continued to take action to strengthen our balance sheet during January-June 2019. During the second quarter of the year, we sold two shopping centres in Finland for EUR 77 million. The disposal price was in line with the assets’ latest IFRS fair value, which demonstrates that there is investor demand for good retail assets and is a further confirmation of the stable value of our assets. In addition, we agreed to sell another land plot adjacent to our Columbus shopping centre in Helsinki, Finland during the quarter with the buyer intending to build 900 residential units which will further strengthen our shopping centre. We will continue to recycle capital going forward as our vision is to focus on multi-functional properties that are connected to public transportation in growing urban areas.
We have a very stable business model with the clear majority of our leases linked to indexation. In addition, our diversified tenant mix with a relatively low share of fashion tenants, has helped us weather the headwinds the retail sector is facing. After six months of solid performance and completed disposals of two shopping centres, we have specified our guidance. We now expect EPRA EPS to be in the range of EUR 0.785-0.850 for the full year 2019.“
OUTLOOK 2019 SPECIFIED
Citycon forecasts the 2019 EPRA Earnings per share (basic) to be EUR 0.785–0.850. Furthermore, the Direct operating profit is expected to be in the range of EUR 189–200 million and EPRA Earnings in the range of EUR 140–151 million.
| Previously | |||
| EPRA Earnings per share (basic) | EUR | 0.785–0.850 | 0.775–0.875 |
| Direct operating profit | Me | 189–200 | 188–206 |
| EPRA Earnings | Me | 140–151 | 138–156 |
These estimates are based on the existing property portfolio as well as on the prevailing level of inflation, the EUR–SEK and EUR–NOK exchange rates, and current interest rates. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year.
AUDIOCAST
Citycon's investor, analyst and press conference call and live audiocast will be arranged on Thursday 11 July 2019 at 10 am EEST. The audiocast can be participated by calling in and followed live on the following website: https://citycon.videosync.fi/2019-q2-results
Conference call numbers are:
Participants from Europe +44 333 300 08 04
Participants from the US + 185 585 706 86
PIN: 48783109#
For more investor information, please visit the company’s website at www.citycon.com.
Helsinki, 10 July 2019
Citycon Oyj
Board of Directors
For further information, please contact:
Eero Sihvonen
Executive VP and CFO
Tel. +358 50 557 9137
eero.sihvonen@citycon.com
Mikko Pohjala
IR and Communications Director
Tel. +358 40 838 0709
mikko.pohjala@citycon.com
Citycon is a leading owner, manager and developer of urban, grocery-anchored shopping centres in the Nordic region, managing assets that total almost EUR 4.5 billion. Citycon is No. 1 shopping centre owner in Finland and among the market leaders in Norway, Sweden and Estonia. Citycon has also established a foothold in Denmark.
Citycon has investment-grade credit ratings from Moody's (Baa3) and Standard & Poor's (BBB-). Citycon Oyj’s share is listed in Nasdaq Helsinki.
www.citycon.com