Citycon Oyj’s Financial Statements Release for 1 January – 31 December 2019: Good operational performance

CITYCON OYJ   Stock Exchange Release 6 February 2020 at 9:00 hrs

- Solid overall performance in 2019
- Like-for-like net rental income grew in all business units
- Total tenant sales grew by 2.6%; positive like-for-like sales development
- Total footfall increased by 3.8%; positive like-for-like footfall development
- Continued positive leasing spread driven by Sweden&Denmark
- Loan-to-value improved to 42.4 % as a result of the successful issuance of the EUR 350 million hybrid bond

OCTOBER—DECEMBER 2019

- Net rental income was EUR 53.5 million (Q4/2018: 53.7). Like-for-like properties increased net rental income by EUR 0.5 million, and the acquisition of Straedet in Denmark increased net rental income by EUR 0.4 million. Net rental income developed positively in best assets, Iso Omena in particular. This was partly offset by divestments in 2018 and Q2/2019, impacting net rental income by EUR -1.6 million. Weaker currencies had an impact of EUR -1.2 million. Adoption of IFRS 16 standard increased net rental income in Q4/2019 by EUR 1.7 million in total.
- EPRA Earnings increased to EUR 35.6 million (34.2) particularly due to lower administrative expenses. EPRA Earnings per share (basic) was EUR 0.200 (0.192), impact from weaker currencies was EUR -0.005 per share.
- IFRS-based earnings per share decreased to EUR -0.15 (0.03) mainly as a result of higher fair value losses of investment properties. In addition, net financial expenses were higher following one-off bond buy-back costs during the quarter.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. Please see Note 2 for more information.

JANUARY—DECEMBER 2019

- Net rental income increased to EUR 217.4 million (Q1-Q4/2018: 214.9). Completed (re)development projects increased net rental income by EUR 3.8 million, and like-for-like properties increased NRI by EUR 0.9 million. Divestments decreased net rental income by EUR -6.2 million and weaker SEK and NOK by EUR -3.0 million. Adoption of IFRS 16 standard increased net rental income in Q1-Q4/2019 by EUR 7.0 million in total.
- EPRA Earnings increased to EUR 145.6 million (143.5) due to higher net rental income and lower net financial expenses. EPRA Earnings per share (basic) was EUR 0.818 (0.806), negative impact from weaker currencies was EUR -0.015 per share.
- IFRS-based earnings per share was EUR 0.04 (0.09) as a result of larger fair value losses of investment properties.
-Net cash from operations per share increased to EUR 0.76 (0.54) resulting from lower net financial expenses, mainly due to lower one-off bond buy-back costs for the full period
-The Board of Directors proposes to the Annual General Meeting that the Board be authorised to decide on the distribution of dividend for the financial year 2019, and assets from the invested unrestricted equity fund. Based on the proposed authorization the maximum amount of dividend to be distributed shall not exceed EUR 0.05 per share and the maximum amount of equity repayment distributed from the invested unrestricted equity fund shall not exceed EUR 0.60 per share. Based on the authorization, the company could distribute a maximum of EUR 8,899,926.25 as dividends and EUR 106,799,155.00   as equity repayment. The dividend/equity repayment would be paid to shareholders in four installments.
- The reporting period includes the adoption of IFRS 16 from 1.1.2019 onwards. Please see Note 2 for more information.

KEY FIGURES

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) 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.
5. The adjusted key figure includes hybrid bond coupons and amortized fees.

CEO F. SCOTT BALL:

“For Citycon, 2019 was a year of portfolio and operational improvement as well as a year of strategic review in order to define the company’s short and medium-term focus areas. Our new organization and other improvements have begun to provide consistency across the portfolio, allow us to grow specific segments of our business and enable us to take advantage of our Pan-Nordic scale.

Citycon’s operational performance remained solid in 2019. The total net rental income increased by 1.2 % to EUR 217.4 million while like-for-like net rental income grew in all our business units. EPRA earnings increased from previous year and the EPRA earnings per share was EUR 0.818 in 2019. In general, the occupancy rate remained at a high level driven by good locations of our shopping centres which are supported by seamless public transportation connection. We were pleased that total tenant sales increased by 2.6% and total footfall by 3.8% during 2019.

In 2019 we continued to take action to strengthen our balance sheet. The successful 350 million green hybrid bond issuance in November was an important milestone in strengthening our credit profile. Following the hybrid bond issuance our loan-to-value ratio decreased to 42.4% at the end of 2019. We are now in the range of our target loan-to-value -level of 40-45%. A strong balance sheet and maintaining the loan-to-value ratio below 45% remains a key priority for the company also in the future. During the year, we also improved the average quality of our portfolio by divesting two secondary 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.

Citycon has large assets in growing urban locations that offer great densification potential. Our strategy is to become a mixed-use urban real estate investor and owner. It is clear we have a great number of embedded growth opportunities within the existing portfolio and we have identified 320,000 sq.m. residential opportunity within the existing portfolio. Of that number approximately 60,000 sq.m. is already zoned, 130,000 sq.m. is in the zoning process and we are beginning to discuss for the remaining 130,000 sq.m. It is important to note that only small part of this is on our current valuations. The additional value will be realised as we achieve zoning approvals. An excellent example of mixed-use development is our project in Lippulaiva. Lippulaiva will have a significant residential component attached to the shopping centre and we have building rights for up to eight buildings with 500 apartments in total. The project is processing as planned and we estimate to open the Lippulaiva shopping centre in spring 2022.

Overall, we have an urban asset portfolio with very stable business model in which 85% of our leases are linked to indexation. In addition, our diversified tenant mix with a relatively low share of fashion tenants and transportation hubs as anchors, gives us a strong position in the retail market. Looking at our financial guidance for 2020, we expect our EPRA EPS to be in the range of EUR 0.815-0.915 in 2020. From 2020 onwards, we will also give a guidance on adjusted EPRA EPS which includes the coupons and amortized fees from the hybrid bond. We expect our adjusted EPRA EPS to be in range of EUR 0.720-0.820 in 2020.”

OUTLOOK

Citycon’s Board of Directors resolved to update Citycon’s guidance practice following the issuance of Capital Securities. In order to quantify the impact of hybrid bond coupons, Citycon will also provide guidance on adjusted EPRA EPS after hybrid bond coupon payments. As of 2020, Citycon will provide guidance on direct operating profit, EPRA EPS and adjusted EPRA EPS. The adjusted EPRA metrics include all coupon expenses from the Capital Securities.

Citycon forecasts the 2020 EPRA Earnings per share (basic) to be EUR 0.815-0.915. Furthermore, the Direct operating profit is expected to be in the range of EUR 191-209 million and adjusted EPRA EPS in the range of EUR 0.720-0.820 million.

The acquisition of the remaining interest in the portfolio of three shopping centres, as disclosed on 5 February 2020, is included in the estimates.  Otherwise, the 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.

EVENTS AFTER THE REPORTING PERIOD

On 5 February 2020 was disclosed that Citycon has agreed to acquire a portfolio of three shopping centres in Norway. The transaction value amounts approximately to EUR 145 million.

AUDIOCAST

Citycon's investor, analyst and press conference call and live audiocast will be arranged on Thursday, 6 February 2020 at 10 am EET. The audiocast can be participated by calling in and followed live at https://citycon.videosync.fi/2019-q4-results/register.

Conference call numbers are:

Participants from Europe +44 3333 000 804
Participants from US +1 855 857 0686

PIN: 35377183#

For more investor information, please visit the company’s website at www.citycon.com.

Espoo, 5 February 2020

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

Citycon Oyj is a leading owner, manager and developer of urban, grocery-anchored shopping centres in the Nordic region, managing assets that total approximately EUR 4.4 billion. Citycon is the number one shopping centre owner in Finland and among the market leaders in Norway, Sweden and Estonia. Citycon has also established a foothold in Denmark.

Citycon Oyj has investment-grade credit ratings from Moody’s (Baa3) and Standard & Poor’s (BBB-). Citycon Oyj’s shares are listed on Nasdaq Helsinki Ltd. stock exchange.

For more information about Citycon Oyj, please visit www.citycon.com.