Citycon Oyj’s Financial Statements Release for 1 January – 31 December 2018: EPRA Earnings returned to growth in Q4/2018

Citycon Oyj   Stock Exchange Release   7 February 2019 at 09:00 hrs

-Occupancy rate improved to 96.4% driven by Finland&Estonia
- EPRA earnings returned to growth in Q4/2018. Planned divestments conducted in 2017 and in 2018 as well as weaker currencies impacted full year net rental income and EPRA Earnings as expected.
-Administrative expenses declined by 11.8% excluding the one-off expenses related to management changes
-Total tenant sales and footfall grew and were stable on a L-F-L basis

OCTOBER—DECEMBER 2018 
- Net rental income was EUR 53.7 million (Q4/2017: 53.9). Planned divestments impacted net rental income by EUR -2.1 million and weaker currencies by EUR -0.5 million, while redevelopment projects increased net rental income by 1.8 million.
- EPRA Earnings, excluding the one-time expenses related to management changes, increased to EUR 36.6 million (33.8) or EUR 0.041 (0.038) per share. Reported EPRA Earnings increased to EUR 34.2 million (33.8) mainly due to lower direct net financial expenses. EPRA earnings also included one-time expenses of EUR 2.4 million related to management changes. EPRA Earnings per share (basic) was EUR 0.038 (0.038).
- IFRS-based earnings per share decreased to EUR 0.01 (0.03) mainly due to higher fair value losses.

JANUARY—DECEMBER 2018
- Net rental income was EUR 214.9 million (Q1-Q4/2017: 228.5). (Re)development projects and acquisition of Straedet in Denmark increased NRI by EUR 8.4 million, while property divestments decreased net rental income by EUR 16.4 million and weaker SEK and NOK by EUR 4.7 million.
- EPRA Earnings excluding the one-time expenses related to management changes was EUR 145.9 million or EUR 0.164 (0.171) per share. Reported EPRA Earnings was EUR 143.5 million (152.3) due to lower net rental income. Lower direct net financial expenses as well as administrative expenses partly offset this reduction. Administrative expenses decreased by EUR 1.0 million even though they included one-time expenses related to management changes of EUR 2.4 million. EPRA Earnings per share (basic) was EUR 0.161 (0.171). Negative impact from weaker currencies was EUR 0.004 per share.
- IFRS-based earnings per share was EUR 0.02 (0.10) as a result of net fair value losses on investment properties, increase in one-time net financial expenses and impacts from property divestments as well as currencies.
- Net cash from operations per share decreased to EUR 0.11 (0.17) mainly due to one-off financial expenses paid.
- 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 2018, and assets from the invested unrestricted equity fund. Based on the authorization the maximum amount of dividend to be distributed shall not exceed EUR 0.01 per share and the maximum amount of equity repayment distributed from the invested unrestricted equity fund shall not exceed EUR 0.12 per share. Based on the authorization, the company could distribute a maximum of EUR 8,899,926.28 as dividends and EUR 106,799,115.36 as equity repayment. The dividend/equity repayment would be paid to shareholders in four instalments.

KEY FIGURES

Q4/2018 Q4/2017 % 1) Comparable change % 3)
Net rental income Me     53.7 53.9 -0.3 % 0.6 %
Direct Operating profit 2) Me     44.1 45.9 -4.0 % -3.0 %
Earnings per share (basic) EUR 0.01 0.03 -76.3 % -75.5 %
Fair value of investment properties Me     4,131.3 4,183.4 -1.2 % -
Loan to Value (LTV) 2) % 48.7 46.7 4.1 % -
EPRA based key figures 2)
EPRA Earnings Me     34.2 33.8 1.2 % 2.5 %
EPRA Earnings per share (basic) EUR 0.038 0.038 1.2 % 2.5 %
EPRA NAV per share EUR 2.59 2.71 -4.5 % -
2018 2017 % 1) Comparable change % 3)
Net rental income Me     214.9 228.5 -6.0 % -4.0 %
Direct Operating profit 2) Me     187.6 200.5 -6.4 % -4.4 %
Earnings per share (basic) EUR 0.02 0.10 -81.0 % -80.1 %
Fair value of investment properties Me     4,131.3 4,183.4 -1.2 % -
Loan to Value (LTV) 2) % 48.7 46.7 4.1 % -
EPRA based key figures 2)
EPRA Earnings Me     143.5 152.3 -5.8 % -4.4 %
EPRA Earnings per share (basic) EUR 0.161 0.171 -5.8 % -4.4 %
EPRA NAV per share EUR 2.59 2.71 -4.5 % -

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) new 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.

CEO F. SCOTT BALL:

My appointment as Citycon’s new CEO as of January 1, 2019 was announced in November. During the past several weeks, I have had the opportunity to visit almost all of our assets and offices. I have been truly impressed by the quality of the real estate and by the talent of our people. I believe we have a strong asset base and excellent team with which we can take Citycon to the next level.

Looking at the operational performance in 2018, our business developed in line with expectations. This past year, our net rental income amounted to EUR 214.9 million and the proforma like-for-like net rental income grew by 1.0 % driven by the development in Iso Omena in particular. Our EPRA earnings were impacted by the planned disposals carried out in 2017-2018, currency impact and one-time management change expenses resulting in EPRA earnings of EUR 143.5 million. Citycon continued its strict cost management measures and administrative expenses declined by 11.8% excluding the one-time management change expenses. Looking at our financial guidance for 2019, we expect our EPRA EPS to be in the range of EUR 0.155-0.175.

During the year we continued to improve the average quality of our portfolio with the divestment of five secondary assets. The total proceeds of EUR 96 million were used to fund our development pipeline, including Mölndal Galleria and Lippulaiva. We will continue to recycle capital going forward as our vision is to focus on multi-functional shopping centres that are connected to public transportation in growing urban areas. Thanks to our capital recycling actions, we are pleased that already now 40% of our asset value is concentrated in our five largest assets. Strengthening the balance sheet remains a key priority for the company.

Our industry is changing rapidly and a noticeable divergence between the best-in-class and secondary assets is clear. In this current environment, we must intensify our focus on maximizing value at each of our assets. We are taking steps to ensure that our operating team has the necessary resources in place in order to spend more time in our assets. We have identified asset management improvement actions and changes within the organization and have already begun to implement these changes. These improvements will 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. In addition, we continue to focus on capital allocation and ensuring we remain good stewards of capital going forward.

My first weeks as Citycon’s CEO have been a tremendously positive experience and the team is energized to take the company forward.

OUTLOOK

Citycon forecasts the 2019 EPRA Earnings per share (basic) to be EUR 0.155-0.175. Furthermore, the Direct operating profit is expected to be in the range of EUR 188-206 million and EPRA Earnings in the range of EUR 138-156 million.

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. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year.

EVENTS AFTER THE REPORTING PERIOD 

  • F. Scott Ball started on  January 2019 as CEO of Citycon.

  • On 7 January 2019 was disclosed that Anu Tuomola, Citycon’s General Counsel and member of the Corporate Management Committee, will leave the company based on a mutual understanding in March 2019.

AUDIOCAST

Citycon's investor, analyst and press conference call and live audiocast will be arranged on Thursday 7 February 2019 at 10 am EET. The audiocast can be participated by calling in and followed live at: https://citycon.videosync.fi/2019-02-07-financial-statement.

Conference call numbers are:

Participants from Europe +44 3333 000804
Participants from the US +1 631 913 1422

PIN: 69568317#

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

Espoo, 6 February 2019

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

Mikko Pohjala
IR and Communications Director
Tel. +358 40 838 0709
mikko.pohjala@citycon.com

Citycon is a leading owner, manager and developer of urban, grocery-anchored shopping centres in the Nordic region, managing assets that total approximately EUR 4.5 billion. Citycon is No. 1 shopping centre owner in Finland and among the market leaders in Norway, Sweden and Estonia. Citycon has also established a foothold in Denmark.

Citycon has investment-grade credit ratings from Moody's (Baa2) and Standard & Poor's (BBB). Citycon Oyj’s share is listed in Nasdaq Helsinki.

www.citycon.com


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