Citycon 2021: Strong operating figures combined with positive fair value development

Stock exchange releases - 17 February 2022

Citycon Oyj   Stock exchange release 17 February 2022 at 09:00 hrs

- Strong quarter in like-for-like tenant sales (+7.6%) and footfall (+8.2%). Like-for-like tenant sales increased +3.8% in 2021 compared to 2020, which was partially pre-pandemic. Compared to 2019, like-for-like tenant sales and footfall were +0.5% and -14.4%, respectively.
- Rent collection was 96% for the full year, continuing to exhibit one of the best collection rates in the industry
- The operating properties recorded a fourth consecutive quarter of uplift in valuations. In total fair value gain in 2021 was EUR 48.6 million, an increase of +1.2% over 2020 levels.
- Like-for-like net rental income grew 2.9 % in Q4/2021. For full year 2021, the decrease in the like-for-like net rental income remained relatively modest at -1.5 %, particularly impressive given 2020 was a partially pre-pandemic year.
- Active capital recycling continued during the last quarter with Columbus disposal above book value and opportunistic repurchase of approximately EUR 69 million of Citycon shares at 40% discount to NRV.
- Full-year results for direct operating profit and EPRA Earnings per share in-line with Citycon guidance.
- Subsequent to year-end Citycon sold additional two non-core assets in Norway above book value, when considering near-term capex. Additionally, Citycon entered into forward funding agreement to purchase 200-unit residential building in Sweden.

OCTOBER—DECEMBER 2021
- Net rental income was EUR 49.3 million (Q4/2020: 49.9). The decrease was primarily due to the divestments made in Q1/2021 and Q4/2021. Stronger currencies increased net rental income by EUR 1.0 million. On a like-for-like basis, net rental income increased by 2.9 % compared to previous year.
- EPRA Earnings decreased to EUR 27.5 million (32.0) due to divestments and lower direct share of profit of joint ventures and associated companies, which were compensated by lower direct financial expenses. EPRA Earnings per share (basic) was EUR 0.158 (0.180).
- Adjusted EPRA earnings were EUR 19.8 million (28.0) and were impacted by the newly issued hybrid bond coupons.
- IFRS-based earnings per share was EUR 0.23 (-0.07).
- Positive fair value development during the quarter of EUR 42.7 million.
- Retail occupancy increased by 50 basis points to 94.2%.

JANUARY—DECEMBER 2021
Note: Year-over-year comparisons to 2020 are adversely impacted due to the fact that 2020 was partially pre-pandemic.
- Full year results for Direct Operating Profit and EPRA EPS in-line with company guidance.
- Net rental income was EUR 202.3 million (Q1-Q4/2020: 205.4). Net rental income continued to be affected negatively by COVID-19 pandemic and its impact on straight-lined discounts from 2020. In addition, the divestments made in Q1/2021 and Q4/2021 decreased the net rental income.  On a like-for-like basis, net rental income declined slightly (-1.5%).
- EPRA Earnings were EUR 124.4 million (136.6) as a result of divestments’ impact on net rental income, lower direct share of profit of joint ventures and associated companies and higher tax expenses. EPRA Earnings per share (basic) was EUR 0.703 (0.767) with a positive impact from stronger currencies being EUR 0.024 per share.
- Adjusted EPRA earnings were EUR 100.0 million (120.3) due to the addition of newly issued hybrid bond coupons.
- IFRS earnings per share improved to EUR 0.55 (-0.25) mainly due to stronger result in property valuations which were up 1.2% over 2020, and share repurchase. Net cash from operations per share increased to EUR 0.72 (0.71) resulting from higher earnings.
- Citycon disposed of four non-core assets for EUR 253.2 million and repurchased approximately EUR 69 million shares.
-The Board of Directors proposes to the Annual General Meeting that the Board be authorised to decide on the profit sharing for the financial year 2021. Based on the proposed authorization the maximum amount of profit sharing, to be paid as equity repayment, would be EUR 0.50 per share.

KEY FIGURES

Key figures
Q4/2021 Q4/2020 % FX Adjusted % 1)
Net rental income MEUR 49.3 49.9 -1.2 % -3.2 %
Direct Operating profit  2) MEUR 42.2 43.1 -2.3 % -4.4 %
IFRS Earnings per share (basic) 3) EUR 0.23 -0.07 - -
Fair value of investment properties MEUR 4189.2 4152.2 0.9 % -
Loan to Value (LTV) 2) 4) % 40.7 46.9 -13.2 % -
EPRA based key figures 2)
EPRA Earnings MEUR 27.5 32.0 -14.2 % -16.2 %
Adjusted EPRA Earnings 3) MEUR 19.8 28.0 -29.2 % -31.1 %
EPRA Earnings per share (basic) EUR 0.158 0.180 -12.3 % -14.4 %
Adjusted EPRA Earnings per share (basic) 3) EUR 0.114 0.157 -27.6 % -29.6 %
EPRA NRV per share EUR 11.54 11.48 0.5 % -
Q1-Q4/2021 Q1-Q4/2020 % FX Adjusted % 1)
Net rental income MEUR 202.3 205.4 -1.5 % -4.0 %
Direct Operating profit  2) MEUR 176.1 180.4 -2.4 % -5.0 %
IFRS Earnings per share (basic) 3) EUR 0.55 -0.25 - -
Fair value of investment properties MEUR 4189.2 4152.2 0.9 % -
Loan to Value (LTV) 2) 4) % 40.7 46.9 -13.2 % -
EPRA based key figures 2)
EPRA Earnings MEUR 124.4 136.6 -8.9 % -11.7 %
Adjusted EPRA Earnings 3) MEUR 100.0 120.3 -16.9 % -19.7 %
EPRA Earnings per share (basic) EUR 0.703 0.767 -8.4 % -11.2 %
Adjusted EPRA Earnings per share (basic) 3) EUR 0.565 0.676 -16.4 % -19.3 %
EPRA NRV per share EUR 11.54 11.48 0.5 % -
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 adjusted key figure includes hybrid bond coupons and amortized fees.
4) Highly liquid cash investments has been taken into account in net debt.


CEO, F. SCOTT BALL:

“Citycon continued to demonstrate the strength of our strategy and portfolio amidst a challenging COVID-19 environment. We are encouraged to see continued performance and valuation improvement at our centres, with operations nearly back to pre-covid levels. The strong operational figures reflect the stability of our necessity-based centres focused on serving as a last mile logistics hub for delivery of grocery, municipal, and other services with excellent access to public transportation and locations in the strongest and fast-growing cities in the Nordics.

This strategy was positively reflected in our key operational metrics, and I am pleased we were able to meet the full year guidance we set last quarter, despite the resurgence of the Omicron variant in our markets. Rent collection remained high, as has been the case throughout the pandemic, at 96% for 2021.  Tenant sales exceeded 2020 levels which directly results from our tenant mix and large share of necessity categories, such as groceries, pharmacies, municipal and healthcare services.  We were also pleased to see these figures surpass pre-pandemic levels. Similarly, the quarter produced significant like-for-like growth in both footfall (+8.2%) and tenant sales (+7.6%) during the last quarter of 2021.  The like-for-like net rental income in Q4 increased 2.9 % compared to Q4/2020. Notably, the decline in the like-for-like net rental income for full year 2021 remained modest (-1.5%) and is encouraging considering 2021 reflected a full-year of COVID while the first quarter of 2020 was, effectively, pre-pandemic operations. Notably, 2021 like-for-like NRI is clearly approaching 2019 levels.


Our operating properties recorded a fourth consecutive quarter of uplift and the total fair value change of investment properties in 2021 amounted to EUR 48.6 million of which EUR 42.7 million occurred in Q4/2021 alone. The positive development highlights not only the quality of our necessity-based grocery-anchored urban hubs, but also the improving investment appetite for retail assets in the Nordics and greater Europe.  Improved valuations also contributed to our IFRS loan-to-value declining throughout the year to 40.7%, further solidifying our investment grade balance sheet and enhancing our flexibility to pursue transactions that increase shareholder value.

On the transaction front, we continued our opportunistic active capital recycling and sold four non-core assets during the year for EUR 250 million and above book value. Furthermore, as disclosed on 7th February 2022, we have an agreement to dispose of two additional non-core assets in Norway in early 2022, again, above the latest IFRS fair value and at an attractive blended cap rate of 5%. In addition to demonstrating strong private market demand for retail assets, we also have demonstrated our disciplined capital allocation by using part of the sale proceeds to repurchase 10 million of our own shares and take advantage of the large discount of those shares relative to NRV. Additionally, we also announced on 7th February 2022 that we have entered into a forward funding agreement to purchase a brand-new residential asset comprising 200 apartments in Stockholm near our Kista and Jacobsberg centres.  The building will deliver in 2024 and will enhance the demand for our existing centres while continuing to diversify our portfolio with a greater share of residential income.


Looking ahead to 2022, we have a very stable business model with some of the best necessity-based centres in the Nordics and 92% of our leases linked to indexation.  This should provide a tailwind as we head into an improving economic and inflationary environment with the COVID-19 pandemic, hopefully, subsiding. We also have an investment-grade balance sheet that provides us with a strong financial position and flexibility with no significant near-term maturities until 2024.

Operating from this position of strength provides us various levers we can pull to execute our strategy and continued portfolio transformation to core, necessity- based centres with organic opportunities for growth and diversification through mixed-use development, particularly focused on adding residential that enhances the demand at our existing assets.  We are excited for the opening of Lippulaiva in April 2022 and it is a great example of our comprehensive strategy in action: a full-service, mixed-use, urban hub with several large grocery anchors, a wide range of private and municipal services, direct connection to the metro, surrounded by eight residential towers comprising approx. 500 apartments, as well as being a net-zero emitter with sustainable technologies such as geothermal energy. We expect it to meaningfully contribute to earnings in 2022 and beyond.”  

OUTLOOK

Citycon forecasts the 2022 direct operating profit to be in range EUR 164-180 million, EPRA EPS EUR 0.62–0.72 and adjusted EPRA EPS EUR 0.48–0.58.

Direct operating profit MEUR 164–180
EPRA Earnings per share (basic) EUR 0.62–0.72
Adjusted EPRA Earnings per share (basic) EUR 0.48–0.58

The outlook assumes that there are no major changes in macroeconomic factors and that there will not be another wave of COVID-19 with restrictions resulting in significant store closures. These estimates are based on the existing property portfolio and recently announced disposals as well as on the prevailing level of inflation, the EUR–SEK and EUR–NOK exchange rates, and current interest rates.

EVENTS AFTER THE REPORTING PERIOD

On 19 January 2020 it was published that Mr Ofer Stark elected to resign from the Board as of 31 January 2022.

On 7 February 2022 it was published that Citycon acquired a residential asset, comprising more than 200 apartments, in Sweden and divested two non-core centres in Norway.


AUDIOCAST

Citycon's investor, analyst and press conference call and live audiocast will be arranged on Thursday, 17 February 2022 at 10 am EET. The audiocast can be participated by calling in and followed live at https://citycon.videosync.fi/full-year-2021

Conference call numbers are:
Participants from Europe +44 3333 000 804
Participants from US +1 6319 131 422
PIN: 53464393#

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


Helsinki, 17 February 2022
Citycon Oyj
Board of Directors

For further information, please contact:
Bret McLeod
Chief Financial Officer
Tel. +46 73 326 8455
bret.mcleod@citycon.com

Sakari Järvelä
VP, Corporate Finance and Investor Relations
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 4.5 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 ratings from Moody's (Baa3), Fitch (BBB-) and Standard & Poor's (BBB-). Citycon Oyj’s shares are listed on Nasdaq Helsinki.

www.citycon.com

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