Citycon Oyj Interim Report 15 May 2024 at 19:20 hrs
Strong operational performance
- Total net rental income increased by 6.7% compared to the previous year.
- In comparable FX rates, total net rental income increased by 8.2%.
- Like-for-like net rental income increased by 6.5% compared to the previous year.
- The weakening NOK and SEK FX-rates impacted on our results; the impact on total net rental income was EUR -0.7 million.
- Average rent per sq.m. increased by 4.1% with comparable FX to EUR 25.1 per sq.m (vs. Q1/2023).
- Retail occupancy 94.9% vs 94.6% in Q1/2023 (including Kista).
- Like-for-like footfall unchanged (-0.1%).
- Like-for-like tenant sales increased 3.0%.
- Fair value change of investment properties in Q1/2024 EUR 46.2 million, including Kista.
The strengthening of the balance sheet as a priority
- In Q1, Citycon continued to improve its balance sheet by EUR 48.2 million share issue which was 4-times oversubscribed.
- Citycon placed a 5-year EUR 300 million green bond with an orderbook approximately seven times over-subscribed.
- Citycon executed approx. EUR 213 million tender of its bond maturing in October 2024.
- Following the successful execution of these financing transactions, Citycon's debt maturity profile was significantly improved and refinancing risk was further reduced.
KEY FIGURES
| Citycon Group key figures 1) | Q1/2024 | Q1/2023 | % | FX Adjusted Q1/2023 | FX Adjusted % 2) | Q1-Q4/2023 | ||
| Net rental income | MEUR | 51.0 | 47.8 | 6.7 % | 47.2 | 8.2 % | 195.7 | |
| Like-for-like net rental income development | % | 6.5 % | 9.4 % | - | - | - | 6.5 % | |
| Direct operating profit 3) | MEUR | 39.7 | 38.3 | 3.7 % | 37.7 | 5.4 % | 164.8 | |
| IFRS Earnings per share (basic) 4) | EUR | 0.33 | 0.32 | 3.6 % | 0.31 | 4.9 % | -0.70 | |
| Fair value of investment properties | MEUR | 4082.4 | 3996.7 | 2.1 % | - | - | 3858.2 | |
| Loan to Value (LTV) 3) | % | 48.3 | 42.9 | 12.6 % | - | - | 46.3 | |
| EPRA based key figures 3) | ||||||||
| EPRA Earnings | MEUR | 24.5 | 25.3 | -3.0 % | 24.8 | -1.1 % | 109.6 | |
| Adjusted EPRA Earnings 5) | MEUR | 22.1 | 17.9 | 23.9 % | 17.4 | 27.4 % | 80.6 | |
| EPRA Earnings per share (basic) | EUR | 0.138 | 0.150 | -8.0 % | 0.147 | -6.1 % | 0.651 | |
| Adjusted EPRA Earnings per share (basic) 5) | EUR | 0.125 | 0.106 | 17.6 % | 0.103 | 21.0 % | 0.479 | |
| EPRA NRV per share 6) | EUR | 8.96 | 10.78 | -16.9 % | - | - | 9.30 | |
1) Standing portfolio key figures have not been presented for Q1/2024 because there have been no divestments impacting the figures during the reporting period or the comparison period.
2) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.
3) 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.
4) The key figure includes hybrid bond coupons, amortized fees and gains and expenses on hybrid bond repayments.
5) Starting from the beginning of 2024, Citycon excludes reorganisation and one-time costs (Q1/2024: EUR 4.3 million) from Adjusted EPRA Earnings. Due to this, Q1/2024 Adjusted EPRA Earnings is not fully comparable with Q1/2023. The adjusted key figure includes hybrid bond coupons and amortized fees.
6) The effect of currency rates to EPRA NRV/share was EUR -0.20.
CEO HENRICA GINSTRÖM:
First, I want to say that I am both excited and grateful for this opportunity to serve as the next CEO of Citycon. During my 13 years in the company, I have had the privilege to be part of Citycon's journey to become the leading owner and developer of urban hubs in the Nordics and Baltics. We continue to stay committed to our long-stated necessity-based strategy, focusing on high-quality assets in strong, growing urban markets in the major Nordic cities, and most importantly, creating value for all our stakeholders. At the same time, it is important to acknowledge the changes in our operating environment over the last two years, in particular the high interest rates, which have had a major impact on the real estate sector and also Citycon.
Operational performance in January-March 2024 was strong with like-for-like net rental income increasing by 6.5 % supported by rent indexation and strong performance of our core assets. Like-for-like tenant sales increased 3.0 % as sales development continued strong especially in our main tenant categories. Retail occupancy rate, including Kista Galleria, increased 30 bps compared to same period previous year. There was a decline in the occupancy rate compared to year-end due to the Kista consolidation and normal seasonal variation.
Our EPRA earnings remained stable and was EUR 24.5 million, including some one-time costs and restructuring costs related to organizational changes. Excluding these one-off costs, EPRA earnings grew and amounted to EUR 28.8 million.
In connection with the financial statements 2023 we outlined actions to be taken in 2024 regarding asset disposals and cost savings measures with the main goal of strengthening our balance sheet and cash flow. I would like to highlight our commitment to the investment-grade credit rating, which enables us to access the financing market with competitive terms. We demonstrated this commitment during the first quarter as we executed an approximately EUR 50 million share issuance. This action was necessary to defend our investment grade credit rating, and the best solution for the company and all its shareholders. The share issue also facilitated a very successful EUR 300 million new green bond issuance in February, which significantly improved our debt maturity profile and reduced our refinancing risk.
We have set a divestment target of EUR 950 million over next the 24 months and are confident that we will execute that by the end of 2025. In May, we signed a deal to sell Kongssenteret in Norway with pricing close to our book value. With that transaction, we showcase the attractiveness of our necessity-based centers but also highlight the fact that the transaction market is picking up.
During the first quarter of 2024 we have executed several cost-saving measures. Through organizational changes and consolidation of group functions to our Iso Omena head office we have been able to reduce our headcount costs substantially and are committed to delivering on our overhead run-rate target of less than 10% of NRI by the end of this year.
Years 2024 and 2025 will be years of execution and delivery. I am looking forward to building the company's future together with a strong team. Our business fundamentals are strong, and together with a focus on the balance sheet, Citycon is and will be well-positioned going forward. We acknowledge that now is the time to execute on our promises, and that is the key priority for me as a new CEO and for the whole management team.
OUTLOOK (unchanged)
| Direct operating profit | MEUR | 185-203 |
| EPRA Earnings per share (basic) | EUR | 0.62-0.74 |
| Adjusted EPRA Earnings per share (basic) | EUR | 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, 16 May 2024 at 10 am EEST. The webcast can be participated by calling in and following live at this website: https://citycon.videosync.fi/q1-2024
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=50048750
After the registration you will be provided with phone numbers 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
CFO
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 4.1 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
