Citycon H1/2021: Quarter over quarter growth continues
- Net rental income 50.8 MEUR in Q2, above both Q2/2020 and previous quarter (Q1/2021)
- Valuations increased for a second consecutive quarter
- Direct operating profit trending ahead of last year
- LTV improved to 38.9% following the issuance of the hybrid bond and the divestment of 3 non-core assets
- Enhanced liquidity provides flexibility to expedite the portfolio transformation strategy
- Two credit rating outlook upgrades to stable - Citycon now has an investment grade credit rating with a stable outlook from all three major credit agencies
- Q2/2021 l-f-l footfall +11.9% and H1/2021 l-f-l tenant sales +1.8%. June 2021 tenant sales also exceed pre-pandemic June 2019
- Net rental income in Q2 increased to EUR 50.8 million (Q2/2020: 50.2). Net rental income continued to be impacted by COVID-19 pandemic and its effect on footfall and vacancy as well as lower specialty leasing and parking income. Stronger currencies increased net rental income by EUR 2.1 million.
- EPRA Earnings were EUR 32.7 million (36.3) despite higher net rental income, due to increased direct financial expenses and lower direct share of profit of joint ventures and associated companies. EPRA Earnings per share (basic) was EUR 0.183 (0.204).
- Adjusted EPRA earnings were EUR 27.6 million (32.2) and was impacted by hybrid bond coupons.
- IFRS-based earnings per share was improved to EUR 0.18 (-0.23) mainly as a result of investment property fair value gains.
- Net rental income was EUR 101.2 million (H1/2020: 102.6). The trend is positive as Q2/2021 net rental income exceeds Q1/2021 level. Net rental income continued to be affected by COVID-19 pandemic and its impact on footfall and vacancy, as well as straight-lined discounts from 2020 and lower specialty leasing and parking income.
- EPRA Earnings were EUR 64.3 million (71.0) as result of higher direct financial expenses and lower direct share of profit of joint ventures and associated companies. EPRA Earnings per share (basic) was EUR 0.361 (0.399), impact from stronger currencies being EUR 0.014 per share.
- Adjusted EPRA earnings were EUR 55.2 million (63.0) due to hybrid bond coupons.
- IFRS earnings per share was EUR 0.31 (-0.17) mainly due to investment property fair value gains.
|Q2/2021||Q2/2020||%||FX Adjusted % 1)|
|Net rental income||MEUR||50.8||50.2||1.2%||-2.9 %|
|Direct Operating profit 2)||MEUR||44.1||44.0||0.4%||-4.0%|
|IFRS Earnings per share (basic) 3)||EUR||0.18||-0.23||-||-|
|Fair value of investment properties||MEUR||4292.7||4170.4||2.9%||-|
|Loan to Value (LTV) 2) 4)||%||38.9||46.2||-15.9%||-|
|EPRA based key figures 2)|
|Adjusted EPRA Earnings 3)||MEUR||27.6||32.2||-14.4%||-19.8%|
|EPRA Earnings per share (basic)||EUR||0.183||0.204||-9.9%||-15.1%|
|Adjusted EPRA Earnings per share (basic) 3)||EUR||0.155||0.181||-14.4%||-19.7%|
|EPRA NRV per share||EUR||11.66||11.51||1.3%||-|
|Q1-Q2/2021||Q1-Q2/2020||%||FX Adjusted % 1)||2020|
|Net rental income||MEUR||101.2||102.6||-1.3%||-4.2%||205.4|
|Direct Operating profit 2)||MEUR||89.0||90.2||-1.3%||-4.3%||180.4|
|IFRS Earnings per share (basic) 3)||EUR||0.31||-0.17||-||-||-0.25|
|Fair value of investment properties||MEUR||4292.7||4170.4||2.9%||-||4152.2|
|Loan to Value (LTV) 2) 4)||%||38.9||46.2||-15.9%||-||46.9|
|EPRA based key figures 2)|
|Adjusted EPRA Earnings 3)||MEUR||55.2||63.0||-12.4%||-15.8%||120.3|
|EPRA Earnings per share (basic)||EUR||0.361||0.399||-9.5%||-12.6%||0.767|
|Adjusted EPRA Earnings per share (basic) 3)||EUR||0.310||0.354||-12.4%||-15.8%||0.676|
|EPRA NRV per share||EUR||11.66||11.51||1.3%||-||11.48|
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) The Q2/2021 LTV calculation is adjusted for a EUR 29 million deferred payment in other receivables related to asset disposals. In addition, highly liquid cash investments has been taken into account in net debt.
CEO F. SCOTT BALL:
Q2/2021 results reflected positive trends in our business.
Highlights for Q2 and H1/2021:
Continued increase in valuations in Q2
The portfolio valuations increased for a second consecutive quarter. Net investments, including both acquisitions and disposals and development projects increased the fair value by EUR 80.2 million. The total fair value change of investment properties in Q1-Q2/2021 amounted to EUR 24.4 million. The positive development reflects the quality of our grocery-anchored urban hubs, which have a high proportion of necessity tenants, connected to transportation and convenient locations in the largest Nordic cities.
Net rental income increased quarter over quarter - Q2/2021 higher than in 2020
Net rental income increased by 1.2% compared to Q2/2020 being EUR 50.8 million for the quarter (50.2). It is notable that NRI continued to increase quarter over quarter for a second consecutive quarter from EUR 50.4 million in Q1 to EUR 50.8 million in Q2. Direct operating profit was EUR 44.1 million and slightly ahead of Q2/2020 (44.0) despite the divestment of the three non-core assets in Q1/2021. EPRA earnings per share was 0.183 compared to 0.204 in Q2/2020. LTV improved to 38.9% (46.2%) as a result of the issuance of a hybrid bond as well as the divestment of the three non-core assets.
Rent collections remains high with increasing footfall
Rent collection was initially reported as 92% for Q1 but has since increased to 96% reflecting the ultimate collectability of these rents. Q2 rent collection stands at 94% and we expect this to improve in line with Q1 rent collection. In Q2/2021 like-for-like footfall increased 11.9% compared to the previous year. Furthermore, like-for-like tenant sales in Q1-Q2/2021 were above previous year (+1.8%).
Active transaction markets support the execution of our portfolio transformation strategy
The Nordic real estate transaction market continued to pick up, and as previously noted we sold three non-core assets in Q1/2021. We have also experienced reverse inquiries for several of our assets that anticipate transactions at prices above our book values. The appetite and pricing for high quality assets continues to be on an attractive level and facilitates selective capital recycling activities in line with our portfolio transformation strategy, which will increase the share of residential premises and decrease the proportion of non-essential retail in our portfolio.
Extremely strong liquidity with solidified credit ratings following the hybrid issuance
In addition to the significantly improved pricing of our senior bond offering (coupon 1.625%), we continued to improve our liquidity position by successfully issuing a hybrid bond of EUR 350 million in Q2/2021. Together with potential divestments of non-core assets, this enhanced liquidity gives Citycon flexibility to speed up the portfolio transformation with select residential acquisition(s).
The strength of our strategy and stability of our operating results throughout the pandemic were also recognised as upgraded credit rating outlook from both Standard & Poor’s and Moody’s. The ratings now stand at BBB- and Baa3 with a stable outlook.
Continued progress in our organic growth projects on several fronts
In addition to focusing on portfolio recycling and financing activities, we continued to make progress in our organic growth projects on several fronts. We have now identified EUR 222 million of additional building rights’ potential in our current portfolio, of which only a small proportion approx. 50 MEUR has been realized in our book values, leaving the vast majority of approx. 170 MEUR as an additional growth for the company.
We continued to advance our residential strategy with a construction of new residential units in connection to our centre Herkules in Norway. As a result of strong interest towards these residential units and having a significant number of apartment units already sold, we decided to start the construction of the first two residential blocks. In total, the project will comprise 85 apartment units, which will be located in connection to the existing mixed-use retail and service centre.
Upcoming Lippulaiva is a show case of on a modern urban hub with 8 residential towers
Construction of Lippulaiva progressed as planned towards the targeted opening in April 2022 and will contribute to our 2022 results and beyond. In addition to Lippulaiva, Liljeholmen in Stockholm, another large-scale area development project announced earlier this year, will be a great example of our strategy to develop accessible and convenient mixed-use urban hubs by adding residentials and offices to our necessity-based community centres.
Overall, in Q2 we saw improvement in valuation gains and net rental income. Furthermore, we advanced our capital recycling program resulting in balance sheet and liquidity improvement. This improved liquidity will allow us to supplement our organic growth with potential acquisitions, allowing us to accelerate our transformation. These results allow us to tighten our previously issued guidance.
OUTLOOK FOR THE YEAR 2021 (SPECIFIED)
Citycon forecasts the 2021 direct operating profit to be in range EUR 173–184 million, EPRA EPS EUR 0.676–0.726 and adjusted EPRA EPS EUR 0.558–0.608. Adjusted EPRA Earnings per share outlook includes also the coupons of the recently issued EUR 350 million hybrid.
|Direct operating profit||MEUR||173–184||170-188|
|EPRA Earnings per share (basic)||EUR||0.676–0.726||0.651-0.751|
|Adjusted EPRA Earnings per share (basic)||EUR||0.558–0.608||0.558-0.658|
The outlook assumes that there are no major changes in macroeconomic factors and that there will not be a second wave of COVID-19 with restrictions resulting in significant store closures. 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.
For more investor information, please visit the company’s website at www.citycon.com.
Helsinki, 5 August 2021
Board of Directors
For further information, please contact:
Executive VP and CFO
Tel. +358 50 557 9137
Vice President, Strategy & Investor Relations
Tel. +358 40 823 9497
Citycon is a leading owner, manager and developer of mixed-use centres for urban living including retail, office space and housing. We are committed to sustainable property management in the Nordic region with assets that total approximately EUR 4.4 billion. Our centres are located in urban hubs with a direct connection to public transport. Placed in the heart of communities, our centres are anchored by groceries, healthcare and services to cater for 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 share is listed in Nasdaq Helsinki.
For more information about Citycon Oyj, please visit www.citycon.com.