Citycon H1/2024: Strong operational performance combined with continued actions to improve credit profile
CITYCON OYJ Half-Year Financial Report 17 July 2024 at 19:15 hrs
Strong operational performance in Q1-Q2/2024
- Total net rental income increased by 9.3% compared to the previous year.
- In comparable FX rates, total net rental income increased by 9.9%.
- Like-for-like net rental income increased by 5.9%.
- The weakening NOK and SEK FX-rates impacted on our results; the impact on total net rental income was EUR -0.6 million.
- Average rent per sq.m. increased by 4.8% with comparable FX to EUR 25.0 per sq.m (vs. Q2/2023).
- Retail occupancy 95.2% vs. 94.5% in Q2/2023, including Kista.
- Like-for-like footfall increased 0.8%.
- Like-for-like tenant sales increased 2.6%.
- Fair value change of investment properties in Q1-Q2/2024 EUR 69.3 million, including Kista.
- In Q2/2024 fair value change of investment properties was EUR 23.1 million
The strengthening of the balance sheet as a priority
Q1/2024
- Citycon continued to improve its balance sheet by EUR 48.2 million share issue which was 4-times oversubscribed.
- Citycon placed a EUR 300 million green bond with an orderbook approximately seven times oversubscribed.
- Citycon executed approx. EUR 213 million tender of its bond maturing in October 2024.
Q2/2024
- Citycon successfully executed an EUR 266 million exchange for its 2024 hybrid for a new hybrid and cash amount.
- Citycon executed a make-whole for the remaining amount (EUR 97 million) of its bond maturing in October 2024
- Citycon signed and closed the transaction to sell Kongssenteret in Kongsvinger, Norway. The sales price is close to the latest IFRS fair value of the asset.
- Citycon improved its credit maturity profile by extending its EUR 400 million revolving credit facility and EUR 250 million term loan by one year until 2027 and SEK 2,060 million term loan until 2029.
KEY FIGURES
| Q2/2024 | Q2/2023 | % | FX Adjusted Q2/2023 | FX Adjusted % 1) | |||
| Net rental income | MEUR | 54.7 | 48.9 | 11.9 % | 49.0 | 11.6 % | |
| Like-for-like net rental income development | % | 5.6 % | 4.5 % | - | - | - | |
| Direct operating profit 2) | MEUR | 49.0 | 42.2 | 16.1 % | 42.3 | 15.9 % | |
| IFRS Earnings per share (basic) 3) | EUR | 0.11 | 0.18 | -37.3 % | 0.18 | -37.0 % | |
| Fair value of investment properties | MEUR | 3 867.5 | 3 979.0 | -2.8 % | - | - | |
| Loan to Value (LTV) 2) | % | 47.6 | 43.0 | 10.7 % | - | - | |
| EPRA based key figures 2) | |||||||
| EPRA Earnings | MEUR | 29.6 | 26.6 | 11.4 % | 26.6 | 11.4 % | |
| Adjusted EPRA Earnings 4) | MEUR | 24.6 | 19.4 | 26.4 % | 19.4 | 26.5 % | |
| EPRA Earnings per share (basic) | EUR | 0.161 | 0.158 | 1.7 % | 0.158 | 1.8 % | |
| Adjusted EPRA Earnings per share (basic) 4) | EUR | 0.134 | 0.116 | 15.5 % | 0.116 | 15.5 % | |
| EPRA NRV per share 5) | EUR | 9.21 | 10.71 | -14.0 % | - | - | |
| Q1-Q2/2024 | Q1-Q2/2023 | % | FX Adjusted Q1-Q2/2023 | FX Adjusted % 1) | Q1-Q4/2023 | ||
| Net rental income | MEUR | 105.7 | 96.7 | 9.3 % | 96.2 | 9.9 % | 195.7 |
| Like-for-like net rental income development | % | 5.9 % | 6.9 % | - | - | - | 6.5 % |
| Direct operating profit 3) | MEUR | 88.6 | 80.4 | 10.2 % | 79.9 | 10.9 % | 164.8 |
| IFRS Earnings per share (basic) 3) | EUR | 0.44 | 0.50 | -11.9 % | 0.49 | -11.0 % | -0.70 |
| Fair value of investment properties | MEUR | 3 867.5 | 3 979.0 | -2.8 % | - | - | 3 858.2 |
| Loan to Value (LTV) 2) | % | 47.6 | 43.0 | 10.7 % | - | - | 46.3 |
| EPRA based key figures 2) | |||||||
| EPRA Earnings | MEUR | 54.1 | 51.9 | 4.4 % | 51.4 | 5.4 % | 109.6 |
| Adjusted EPRA Earnings 4) | MEUR | 46.7 | 37.3 | 25.2 % | 36.8 | 26.9 % | 80.6 |
| EPRA Earnings per share (basic) | EUR | 0.300 | 0.309 | -2.8 % | 0.306 | -1.9 % | 0.651 |
| Adjusted EPRA Earnings per share (basic) 4) | EUR | 0.259 | 0.222 | 16.6 % | 0.219 | 18.2 % | 0.479 |
| EPRA NRV per share 5) | EUR | 9.21 | 10.71 | -14.0 % | - | - | 9.30 |
1) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.
2) Citycon presents alternative performance measures according to the European Securities and Markets Authority (ESMA) guidelines. More information is presented in Basis of Preparation and Accounting Policies in the notes to the accounts.
3) The key figure includes hybrid bond coupons, amortized fees and gains/losses and expenses on hybrid bond repayments.
4) Starting from the beginning of 2024, Citycon excludes reorganisation and one-time costs (Q1-Q2/2024: EUR 6.8 million) from Adjusted EPRA Earnings. Due to this, Adjusted EPRA Earnings is not fully comparable with the previous year. The adjusted key figure includes hybrid bond coupons and amortized fees.
5) The effect of currency rates to EPRA NRV/share was EUR -0.08.
CEO HENRICA GINSTRÖM:
Citycon’s operational performance remained strong and in line with our expectations as total net rental income increased by 9.9% with comparable FX-rates and like-for-like net rental income by 5.9 % during the first half of the year. At the same time, we saw like-for-like sales growth of 2.6% compared to Q1-Q2/2023. It is notable that consumer spending across our centres has remained to be very robust reflecting the strength of our strategy to focus on everyday convenience with grocery and public service anchors. All our main retail segments continued to show strong sales growth.
Retail occupancy increased by 70 bps compared to Q2/2023, reaching 95.2% and reflecting the attractiveness of our locations. Collection rate remained high at 98% for Q1-Q2/2024 demonstrating again a full pass-through of indexations. Our tenants continue to benefit from increasing sales, and despite the higher rent levels, the occupancy cost ratio remains at a modest 9.4%. Strong operational performance is also supporting the development of the fair values of our properties. There were small upward yield revisions in a few of our prime assets, but these changes were more than offset by positive cash flow growth driven by rent indexations. We see a stabilization in the valuations in the market in general.
In the second quarter, we continued to take actions to strengthen our balance sheet. We extended our revolving credit facility and two term loans and executed an early redemption of our 2024 bond. These were important actions to improve our credit maturity profile and to secure a sufficient liquidity buffer for several years ahead. Most importantly, we successfully executed an exchange of our 2024 hybrid against a new hybrid and cash amount. This transaction underscores our commitment to maintaining an investment-grade credit rating and confirms Citycon’s access to capital markets.
During the quarter, we also completed the divestment of Kongssenteret at a price close to book value. Furthermore, we are currently working on multiple transactions with three signed LOIs of which two are in advanced negotiations and one in early stages. Further strengthening our balance sheet remains a key priority for us and we are committed to our EUR 350 million divestment target by the end of this year.
OUTLOOK (specified)
| Current outlook | Previously | ||
| Direct operating profit | MEUR | 185–195 | 185–203 |
| EPRA Earnings per share (basic) | EUR | 0.62–0.68 | 0.62–0.74 |
| Adjusted EPRA Earnings per share (basic) | EUR | 0.46–0.52 | 0.46–0.58 |
The outlook assumes that there are no major changes in macroeconomic factors and no major disruptions from the war in Ukraine. These estimates are based on the existing property portfolio, including Kista 100%, as well as year-end 2023 estimates of inflation, EUR–SEK and EUR–NOK exchange rates, and interest rates.
WEBCAST
Citycon's investor, analyst and press conference call and live webcasting will be held on Thursday, 18 July 2024 at 10 am EEST. The webcast can be participated by calling in and following live at this website: https://citycon.videosync.fi/q2-2024
Questions for the management can be presented by phone. To ask questions, join the teleconference by registering on the following link: https://palvelu.flik.fi/teleconference/?id=50048751
After the registration you will be provided with phone number and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to enter the queue.
The webcast will be recorded and it will be available afterwards on Citycon’s website.
CITYCON OYJ
For further information, please contact:
Sakari Järvelä
Chief Financial Officer
Tel. +358 50 387 8180
sakari.jarvela@citycon.com
Citycon is a leading owner, manager and developer of mixed-use real estate featuring modern, necessity-based retail with residential, office and municipal service spaces that enhance the communities in which they operate. Citycon is committed to sustainable property management in the Nordic region with assets that total approximately EUR 4.2 billion. Our centres are located in urban hubs in the heart of vibrant communities with direct connections to public transport and anchored by grocery, healthcare and other services that cater to the everyday needs of customers.
Citycon has investment-grade credit rating from Standard & Poor's (BBB-). Citycon Oyj’s shares are listed on Nasdaq Helsinki.
www.citycon.com