Summary of the Second Quarter of 2010 Compared with the Previous Quarter
- Turnover decreased to EUR 48.6 million (Q1/2010: EUR 49.5 million), due mainly
to several (re)development projects initiated in Finland causing temporary
reduction in turnover.
- Net rental income increased by 4.0 per cent to EUR 31.8 million (EUR 30.6
million). This increase was due to lower property operating expenses reflecting
common seasonal variations.
- Earnings per share increased to EUR 0.13 (EUR 0.06) due mainly to fair value
changes.
- Direct result per share (diluted) was EUR 0.05 (EUR 0.05).
- The fair value change of investment properties was EUR 22.9 million (EUR 0.8
million), and the fair value of investment properties totalled EUR 2,229.5
million (EUR 2,193.5 million).
- The average net yield requirement for investment properties remained at the
previous quarter's level and was 6.6 per cent (6.6%) at the end of the period,
according to an external appraiser.
- Net financial expenses increased to EUR 14.4 million (EUR 13.1 million) due
mainly to higher interest expenses.
- On the basis of Citycon's loan agreement covenants, its interest cover ratio
was 2.2x (2.3x) and equity ratio 37.1 per cent (39.2%).
- Citycon conducted repurchases of its convertible bonds due 2013 for EUR 3.4
million.
- During the period, the company signed three loan agreements, each worth EUR
50 million and maturing in five years.
- The construction of the Martinlaakso shopping centre was initiated during the
period. The apartments built within the Liljeholmstorget shopping centre were
sold, as per a previous agreement, for a price of SEK 176 million (approx. EUR
18.5 million).
- Chaim Katzman was elected to the Board of Directors by the Extraordinary
General Meeting of 17 May 2010 and was appointed Board Chairman in June.
- The company revises its guidance regarding direct result and direct operating
profit (from 3-6 per cent to 1-4 per cent). The change is due mainly to slower
stabilisation and development of certain projects.
Summary of January-June 2010 Compared with the Corresponding Period of 2009
- Turnover grew by 7.3 per cent to EUR 98.1 million (Q1-2/2009: EUR 91.5
million). This increase was due to the growth in gross leasable area and active
development of the retail properties. Turnover growth was reduced by a slightly
higher vacancy rate and the start-up of new (re)development projects.
- Profit/loss before taxes was EUR 52.0 million (EUR -28.7 million), including a
EUR 23.7 million (EUR -57.6 million) change in the fair value of investment
properties.
- Net rental income increased by 1.8 per cent to EUR 62.5 million (EUR 61.3
million). If the impact of the strengthened Swedish krona is excluded, net
rental income decreased by -0.1 per cent.
- Net rental income from like-for-like properties decreased by 1.0 per cent, due
mainly to higher property operating expenses than in the corresponding period.
These higher operating expenses were caused mainly by exceptionally severe
winter conditions. Additionally, prevailing low inflation or deflation resulted
in very low indexation-based rental increases.
- The company's direct result decreased to EUR 21.5 million (EUR 24.2 million).
- Direct result per share (diluted) was EUR 0.10 (EUR 0.11).
- Earnings per share were EUR 0.19 (EUR -0.11). Changes in the fair value of
investment properties have a substantial impact on earnings per share.
- The occupancy rate was 94.6 per cent (94.8%). The decrease in the occupancy
rate resulted from the start-up of new (re)development projects and a slightly
higher vacancy rate.
- Net cash from operating activities per share decreased to EUR 0.05 (EUR 0.19)
due mainly to extraordinary items and timing differences.
- The equity ratio was 33.8 per cent (36.2%). This decrease resulted mainly from
paid up dividends and equity return and higher debt due to investments.
- The company's financial position remained good during the period. Total
liquidity at the end of the reporting period was EUR 246.2 million, including
unutilised committed debt facilities amounting to EUR 221.2 million and
EUR 25.0 million in cash.
Key Figures
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 % (1))
Turnover, EUR million 48.6 45.6 49.5 98.1 91.5 7.3% 186.3
Net rental income, EUR 31.8 31.0 30.6 62.5 61.3 1.8% 125.4
million
Operating profit/loss, EUR 49.2 1.1 30.3 79.6 -4.7 - 10.3
million
% of turnover 101.3% 2.4% 61.3% 81.1% - - 5.5%
Profit/loss before taxes, 34.8 -10.7 17.2 52.0 -28.7 - -37.5
EUR million
Profit/loss attributable to
parent company 28.4 -7.0 13.0 41.4 -23.8 - -34.3
shareholders, EUR million
Direct operating profit, 26.3 27.1 26.4 52.7 52.8 -0.2% 107.7
EUR million
% of turnover 54.2% 59.4% 53.3% 53.7% 57.7% - 57.8%
Direct result, EUR million 10.1 12.6 11.4 21.5 24.2 -11.2% 50.9
Indirect result, EUR 18.3 -19.5 1.6 19.9 -48.0 - -85.2
million
Earnings per share (basic), 0.13 -0.03 0.06 0.19 -0.11 - -0.16
EUR
Earnings per share 0.12 -0.03 0.06 0.18 -0.11 - -0.16
(diluted), EUR
Direct result per share
(diluted), (diluted EPRA 0.05 0.06 0.05 0.10 0.11 -10.3% 0.23
EPS), EUR
Net cash from operating 0.01 0.09 0.03 0.05 0.19 -74.5% 0.30
activities per share, EUR
Fair value of investment 2,193.5 2,229.5 2,104.5 5.9% 2,147.4
properties, EUR million
Equity per share, EUR 3.20 3.30 3.35 -1.5% 3.31
Net asset value (EPRA NAV) 3.43 3.54 3.58 -1.2% 3.54
per share, EUR
EPRA NNNAV per share, EUR 3.22 3.35 3.46 -3.4% 3.35
Equity ratio, % 32.7 33.8 36.2 - 34.2
Gearing, % 175.9 174.6 157.4 - 169.5
Net interest-bearing debt 1,327.2 1,369.6 1,234.8 10.9% 1,312.2
(fair value), EUR million
Net rental yield, % 6.0 6.0 6.0 - 6.1
Net rental yield, 6.6 6.6 6.4 - 6.6
like-for-like properties, %
Occupancy rate, % 94.5 94.6 94.8 - 95.0
Personnel (at the end of 120 124 114 8.8% 119
the period)
1) Change-% is calculated from exact figures and refers to the change between
2010 and 2009.
CEO Petri Olkinuora's Comments on the First Half of 2010:
"Citycon's net rental income continued to grow in the second quarter. Growth was
generated by both active retail property management and the completed
development projects in Stockholm and Tallinn. On the other hand, growth was
temporarily slowed down by simultaneous, ongoing (re)development projects,
specifically in Finland. The stabilisation of the projects completed last year
was slower than expected.
Earlier this year, Citycon launched four new (re)development projects. These
projects will further enhance the competitiveness and attractiveness of
Citycon's shopping centres. The company has accelerated the execution of its
(re)development pipeline, with seven active major construction sites and several
more being planned, enjoying softening of the construction cost. Naturally
construction projects temporarily lower the rental income of properties, but
once the projects are completed the centres will be more competitive in the
rental market and more attractive to customers.
The financial position of the company is stable. During the reporting period,
Citycon continued repurchasing its convertible bonds as well as selling non-core
properties including the sales of the apartments in Liljeholmstorget and
Jakobsbergs Centrum in Greater Stockholm area. The total value of all the
divestments was about EUR 50 million. The property sales are in compliance with
the company's strategy and release capital for core business.
During the period, the company signed three unsecured EUR 50 million five-year
loan agreements on very competitive terms. At the period end, available
liquidity totalled EUR 246.2 million. This is sufficient to fund ongoing
development projects as well as maturing loans for at least the next 12 months."
Business Environment
During the period, retail sales continued their slow growth both in Finland and
Sweden. In spite of unemployment, consumer confidence in household economies
improved further in all operating countries. In the Baltic countries, high
unemployment and the difficult economic situation weakened consumers' purchasing
power. Both in Finland and Sweden retail sales grew by 2.7 per cent in May
compared with May last year. In Estonia, retail sales decreased by 5.0 per cent.
During the first five months of 2010, retail sales have increased by 2.5 per
cent in Finland and by 3.3 per cent in Sweden. (Sources: Statistics Finland,
Statistics Sweden, Statistics Estonia)
In Finland and Sweden, rises in consumer prices continued during the second
quarter. While in Finland higher prices concerned groceries in particular, in
Sweden the prices of consumables rose faster than food prices. In May, inflation
in Finland was 1.0 per cent, in Sweden 1.2 per cent and in Estonia 3.0 per cent
(source: ibid).
The increased uncertainty in Europe arising from public sector's debt problems
discovered in several countries weakened the stock market during the period.
Availability of financing, however, clearly improved. The property market also
showed signs of a revival, particularly in Sweden.
Business and Property Portfolio Summary
Citycon focuses on the shopping centre business in Finland, Sweden and the
Baltic countries. The company's shopping centres are actively managed and
developed by the company's professional personnel, working locally. In the
Nordic countries, the company is a pioneer in its adherence to the principles of
sustainable development in its shopping centre business. Citycon's objective is
to create added value for customers and to enhance the commercial appeal of its
properties, taking account of each retail property's and its catchment area's
commercial preconditions: purchasing power, competition and consumer demand.
At the end of June 2010, Citycon owned 33 (33) shopping centres and 50 (51)
other properties. Of the shopping centres, 22 (22) were located in Finland,
eight (8) in Sweden and three (3) in the Baltic countries. The market value of
the company's property portfolio totalled EUR 2,229.5 million (EUR 2,104.5
million) with Finnish properties accounting for 65.7 per cent (69.0%), Swedish
properties for 27.0 per cent (23.6%) and Baltic properties for 7.3 per cent
(7.4%). The gross leasable area at the end of the period totalled 947,050 square
metres.
Changes in the Fair Value of Investment Properties
In accordance with the International Accounting Standards (IAS) and the
International Valuation Standards (IVS), an external professional appraiser
conducts a valuation of Citycon's property portfolio on a property-by-property
basis at least once a year. In recent years, the valuation has been conducted on
a quarterly basis, due to changing market conditions. A Property Valuation
Statement at the end of June 2010 is available on the corporate website.
The valuation was conducted by Realia Management Oy, part of the international
Realia Group, which is the preferred appraisal service supplier of CB Richard
Ellis in Finland. The valuation statement includes a description of the
valuation process and the factors contributing to the valuation, as well as the
results of the valuation and a sensitivity analysis.
The valuation was primarily carried out as a cash flow analysis of the net
operating income for a period of ten years. In the case of undeveloped lots and
properties subject to significant alterations in the city plan, the market value
has been determined based on the building volume permitted by the valid zoning
plan. Development properties have been appraised using a specially designed
project calculation model. The aforementioned valuation statement also contains
more details on valuation methods.
The average net yield requirement defined by Realia Management Oy for Citycon's
entire property portfolio came to 6.6 per cent on 30 June 2010. The same yield
figure for Citycon's properties in Finland, Sweden and the Baltic countries
stood at 6.5 per cent, 6.2 per cent and 8.2 per cent, respectively.
As required by IAS 40, Citycon recognises its investment property at fair value.
Its properties' combined market value on the closing date of the interim
accounts is reported in the statement of financial position, while any changes
in their fair value through net fair value gains or losses on investment
property are detailed in the statement of comprehensive income. Thus, the change
in fair value also has a profit impact, and this is reported in the company's
interim reports as a separate item under operating profit, and, consequently,
the profit for the period.
The fair value of the company's investment property in the statement of
financial position equals the property portfolio's total value determined by the
external appraiser, capital expenditure on development projects which the
external appraiser does not take into account when determining fair value, and
the acquisition cost of new properties acquired during the last three months.
During the reporting period, the fair value of Citycon's property portfolio
rose, mainly due to property development. The company recorded a total value
increase of EUR 48.1 million and a total value decrease of EUR 24.4 million. The
net effect of these changes on the company's profit was EUR 23.7 million (EUR
-57.6 million).
Lease Portfolio and Occupancy Rate
Citycon aims to have a versatile and efficiently manageable lease portfolio. The
company favours fixed-term leases. In general, all new leases for retail
premises are signed for a fixed term in all countries. The only exceptions to
this are apartments, storage areas and individual parking spaces.
At the end of the reporting period, Citycon had a total of 4,019 (4,080) leases.
The average remaining length of the lease agreements was 3.3 (3.0) years.
The net rental yield of Citycon's property portfolio was 6.0 per cent (6.0%) and
the economic occupancy rate was 94.6 per cent (94.8%). The decrease in the
occupancy rate was due to new development projects started or planned during the
period and a slight increase in the property portfolio vacancy rate throughout
the company's operating countries.
Citycon's net rental income increased by 1.8 per cent to EUR 62.5 million. The
leasable area decreased by 0.3 per cent to 947,050 square metres. Net rental
income from like-for-like properties decreased by 1.0 per cent.
Like-for-like properties are properties held by Citycon throughout the 24-month
reference period, excluding properties under redevelopment or extension as well
as undeveloped lots. 80.8 per cent of like-for-like properties are located in
Finland. The calculation method for net yield and standing (like-for-like)
investments is based on guidelines issued by the KTI Institute for Real Estate
Economics and the Investment Property Databank (IPD). The following presents
like-for-like net rental income growth by segment.
Like-for-like Net Rental Income by Segment
EUR million Finland Sweden Baltic Other Total
Countries
Q1-2/2008 44.9 12.2 3.1 0.0 60.1
Acquisitions 0.4 0.0 -0.1 - 0.4
(Re)development projects 0.5 0.0 1.7 - 2.2
Divestments -0.1 0.0 - - -0.1
Like-for-like 0.6 0.3 -0.1 - 0.8
Other (incl. exch. rate diff.) -0.4 -1.7 0.0 0.0 -2.0
Q1-2/2009 46.0 10.8 4.6 0.0 61.3
Acquisitions - - - - 0,0
(Re)development projects -2.7 2.1 1.4 - 0.7
Divestments -0.2 -0.2 - - -0.4
Like-for-like -0.4 0.2 -0.2 - -0.4
Other (incl. exch. rate diff.) 0.0 1.1 0.0 0.0 1.3
Q1-2/2010 42.7 13.9 5.8 0.0 62.5
During the last 12 months, the rolling twelve-month occupancy cost ratio for
like-for-like properties was 8.4 per cent. The occupancy cost ratio is
calculated as the share, represented by net rent and potential additional fees
and charges paid by a tenant to Citycon, of the tenant's sales, excluding VAT.
The VAT percentage is an estimate.
Lease Portfolio Summary
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of leases started 175 219 185 360 347 3.7 873
during the period
Total area of leases 36,256 32,511 42,997 79,253 48,577 63.1 141,628
started, sq.m. (1))
Average rent of leases 17.2 21.9 18.2 17.8 21.0 -15.2 23.6
started (EUR/sq.m.) (1))
Number of leases ended 185 215 392 577 410 40.7 781
during the period
Total area of leases ended, 54,801 26,931 68,467 123,268 58,718 109.9 127,730
sq.m. (1))
Average rent of leases ended 14.2 21.1 17.7 16.2 17.0 -4.7 17.5
(EUR/sq.m.) (1))
Occupancy rate at end of the 94.5 94.6 94.8 -0.2 95.0
period, %
Average remaining length of
lease portfolio at the end 3.1 3.3 3.0 10.0 3.1
of the period, year
(1) )Leases started and ended don't necessarily refer to the same premises.
Acquisitions and Divestments
Citycon continues to focus on the development and redevelopment of the company's
retail properties, and follows developments in the shopping centre market across
its operating area. No new property acquisitions took place during the reporting
period, but several apartments were sold, as these are not part of the company's
core business.
Early in January, Citycon divested the building rights for the apartments which
are to be built in connection with the Myllypuro shopping centre and the three
companies the company had established for managing them, to three different
residential investors. The residential investors will each be responsible for
the construction and leasing of their own apartments. Citycon recorded a gain on
sale of EUR 1.7 million on this transaction, tax effects included.
In March, Citycon sold around 25 per cent of the apartments in the Jakobsbergs
Centrum shopping centre for about SEK 120 million (approx. EUR 12 million).
These apartments were sold to a newly-established owners' association under an
agreement according to which the association agreed to purchase 100 per cent of
the shares in Citycon's Swedish subsidiary Tenrot Fastighets AB. The total area
of the apartments sold is approximately 8,000 square metres. Citycon recorded a
gain on sale of EUR 1.0 million on this transaction, tax effects included.
The sale of the apartments at Liljeholmstorget agreed in the summer of 2009 was
finalised in April. The apartments built within the Liljeholmstorget shopping
centre were sold for a price of SEK 176 million (approx. EUR 18.5 million) to
Heba Fastighets AB. Unlike reported earlier, the transaction had no effect on
reported profits.
In April, Citycon also sold its nine per cent holding in Helsingin Autotalo Oy
for EUR 4.5 million.
The transaction had no effect on reported profits.
In May, Citycon sold the building rights for apartments to be built in
connection with the new Martinlaakso shopping centre, and 100 per cent of the
shares in the company Citycon had established for managing the apartments, to
Skanska Talonrakennus Oy for a total of EUR 2.3 million. The transaction had no
effect on reported profits.
Development Projects
Citycon is pursuing a long-term increase in the footfall, cash flow and
efficiency of, as well as the return from, its retail properties. The purpose of
the company's development activities is to keep its shopping centres competitive
for both customers and tenants.
In the short term, redevelopment projects weaken returns from some properties,
as some retail premises may have to be temporarily vacated for refurbishment,
which affects rental income. Citycon aims to carry out any redevelopment
projects phase by phase, thereby avoiding the need to close, for example, the
whole shopping centre during the works in question, thus ensuring continuous
cash flow.
Completed (Re)development Projects
No development projects were completed during the period. Liljeholmstorget,
completed in 2009, became the first European shopping centre to be awarded the
platinum-level LEED certificate in March. The Rocca al Mare development project,
also completed in 2009, was awarded the silver level LEED certificate in
January.
(Re)development Projects in Progress
The redevelopment and extension project of the Åkersberga Centrum, located in
the Österåker district of Greater Stockholm area, is the largest of Citycon's
ongoing (re)development projects. The total budget for the construction project
is around SEK 467 million, or about EUR 49 million, of which Citycon's share is
75 per cent.
The leasable area of the shopping centre will grow by about 13,000 square
metres, the existing shopping centre will be refurbished and additional parking
facilities will be built for 350 vehicles. Construction work was initiated in
the summer of 2009 and the redeveloped shopping centre will be completely ready
in 2011. The shopping centre will remain open throughout the project.
Citycon is building a new shopping centre and an underground car park for 270
vehicles in the Myllypuro district in Helsinki. The shopping centre will have an
excellent location, next to the Myllypuro metro station. The leasable area of
the new shopping centre will be about 7,300 square metres, and its service
offering will include grocery retailers and other daily services. Currently,
more than 60 per cent of the centre's retail premises have been leased. The
shopping centre will be completed in stages, with the first part being opened in
early summer 2011 and the second a year later in 2012.
On 9 June, the cornerstone of the new Myllypuro shopping centre, which will rise
on the site of the demolished old retail centre, was ceremonially laid in the
presence of around 300 invited guests and Myllypuro residents. The new Myllypuro
shopping centre is the first shopping centre in Finland built by Citycon from
the very beginning. The total cost of the Myllypuro project will exceed EUR 60
million, with Citycon's share of the forthcoming shopping centre and parking
hall accounting for EUR 20 million.
A similar project is run by Citycon in the Martinlaakso district in Vantaa,
where the company is building a new shopping centre to replace the old retail
centre. This project was launched in May. The shopping centre will enjoy an
excellent location in the immediate vicinity of railway and bus stations. The
company will invest EUR 26.3 million in the shopping centre, which will have a
gross leasable area of 7,300 square metres and parking facilities for 475 cars.
Apartments will be built in connection with the shopping centre and Citycon has
sold the related building rights for EUR 2.3 million. In addition, Citycon will
receive a one-off compensation of EUR 1.1 million from the City of Vantaa for
the commuter parking facility investment. The project is due for completion in
2011.
Located in Espoo Centre near the railway station, the Espoontori shopping centre
will be thoroughly refurbished during 2010. The shopping centre's premises of
10,400 square metres and its parking facilities will undergo major refurbishment
and modernisation in order to meet current customer needs. Citycon will invest
EUR 18 million in this project. The first refurbished premises were opened to
customers at the end of May.
In downtown Jyväskylä, Citycon is conducting a complete refurbishment of the
interior premises of the Forum shopping centre. The modernised Forum's offering
will have a stronger emphasis on fashion and provide a more versatile range of
specialty stores, cafés and restaurants. The shopping centre's functionality and
ambiance will also be enhanced. Citycon will invest EUR 16 million in this
project. The fully modernised Forum shopping centre will be opened in November
2010. Construction work will be conducted in phases, since most services
remaining in the shopping centre will continue to operate normally throughout
the renovation.
The Hansa property close to the recently redeveloped Trio shopping centre in
Lahti will be provided with a better commercial link to Trio. An alteration to
the city plan is pending, to allow for the construction of retail premises on
the bridge connecting Trio and Hansa above the street of Vapaudenkatu. An area
of 8,000 square metres will be redeveloped in the Hansa property and the project
is due for completion in 2010.
At the Myyrmanni shopping centre in Vantaa, Finland, major tenant alteration
works are under way. Over one fourth of the shopping centre's leasable retail
area is being altered. In addition, the retail premises on Isolinnankatu in Pori
will be redeveloped in two stages.
All of the above-mentioned projects fulfil Citycon's strategy, according to
which the company will redevelop its excellently located retail properties.
These projects are also in line with Citycon's strategy of sustainable
development, which emphasises the redevelopment of retail properties located in
key locations in city and district centres. This will also help to strengthen
existing urban structures and improve the areas' service offering.
The enclosed table lists the most significant development and redevelopment
projects in progress and projects completed in 2009, as approved by the Board of
Directors. Capital expenditure during 2010 on all (re)development projects
amounted to EUR 23.0 million in Finland, EUR 24.8 million in Sweden and EUR 5.7
million in the Baltic countries.
(Re)development Projects Completed in 2009 and in Progress on 30 June 2010 (1))
Estimated Actual Estimated
total gross capital final
Location investment expenditure year of
(EUR million) by 30 June 2010 completion
(EUR million)
Liljeholmstorget Stockholm, Sweden 154.7 (2)) 154.7 completed
Rocca al Mare Tallinn, Estonia 53.8 (3)) 53.8 completed
Åkersberga Centrum Österåker, Sweden 49.0( 2)) 26.4 2011
Torikeskus Seinäjoki, Finland 4.0 2.7 2010
Hansa (Trio) Lahti, Finland 8.0 2.2 2010
Forum Jyväskylä, Finland 16.0 3.5 2010
Espoontori Espoo, Finland 18.0 9.6 2010
Myllypuro Helsinki, Finland 20.0 7.6 2012
Isolinnankatu Pori, Finland 3.0 1.5 2010
Myyrmanni Vantaa, Finland 4.8 2.6 2010
Martinlaakso Vantaa, Finland 26.3 2.7 2011
1) Calculated at end of period exchange rates.
2) Estimated total investment in SEK has not changed from the year end 2009.
3) The original estimated total investment in Rocca al Mare development project
amounted to approximately EUR 68 million.
(Re)development Projects under Planning
The largest of the planned (re)development projects is the Iso Omena extension
project, in which the Matinkylä station on the western metro line will be
connected to the shopping centre by building retail premises on top of the
station. The estimated investment amounts to EUR 100-130 million. Citycon has an
exclusive land use reservation for the planning of the project together with
NCC. The aim is to develop a metro centre which combines excellent commercial
services with direct connections between the metro train and its feeder
terminal. The western metro line connecting Helsinki and Espoo is due for
completion at the end of 2015.
More information on planned projects can be found in Citycon's Annual Report
2009.
Business Units
Citycon's business operations are divided into three business units: Finland,
Sweden and the Baltic Countries. The latter two are sub-divided into two
business areas: Retail Properties and Property Development. The Finnish business
unit was reorganised towards the end of 2009. This unit is sub-divided into the
business areas Retail Property Management (operative management of shopping
centres), Asset Management (property management, investments and divestments),
Leasing and Marketing and Property Development.
Finland
Citycon is the market leader in the Finnish shopping centre business. In 2009,
Citycon's market share was 22 per cent of the Finnish shopping centre market
(source: Entrecon). The company's net rental income from Finnish operations
during the reporting period was EUR 42.7 million (EUR 46.0 million). The
business unit accounted for 68.4 per cent of Citycon's total net rental income.
The key figures of the Finnish property portfolio are presented below.
Development projects and changes in the property portfolio have been covered
previously in this document.
Lease Portfolio Summary, Finland
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of leases started 103 80 99 202 146 38.4 295
during the period
Total area of leases started, 27,200 9,080 30,840 58,040 18,270 217.7 57,220
sq.m. (1))
Average rent of leases started 18.3 23.6 20.7 19.6 24.3 -19.3 22.5
(EUR/sq.m.) (1))
Number of leases ended during 120 94 180 300 210 42.9 408
the period
Total area of leases ended, 48,460 15,520 48,260 96,720 37,790 155.9 81,480
sq.m. (1))
Average rent of leases ended 15.1 23.1 20.3 17.7 18.4 -3.8 19.8
(EUR/sq.m.) (1))
Occupancy rate at end of the 94.1 93.5 94.5 -1.1 94.6
period, %
Average remaining length of
lease portfolio at the end of 3.0 3.2 2.9 10.3 2.8
the period, year
(1) )Leases started and ended don't necessarily refer to the same premises.
Financial Performance, Finland
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of properties 66 65 66 -1.5 66
Gross leasable area, sq.m. 587,650 581,550 593,550 -2.0 587,650
Annualised potential rental 135.5 134.7 135.3 -0.4 135.3
value, EUR million (1))
Gross rental income, EUR 30.1 31.4 31.4 61.5 63.7 -3.4 126.5
million
Turnover, EUR million 31.1 32.6 32.5 63.7 66.1 -3.7 131.3
Net rental income, EUR 21.5 22.9 21.3 42.7 46.0 -7.0 92.4
million
Net fair value gains/losses
on investment property, EUR 11.4 -20.5 -3.0 8.4 -46.0 - -65.1
million
Operating profit/loss, EUR 31.2 1.0 19.8 50.9 -3.0 - 21.2
million
Capital expenditure, EUR 14.4 3.2 8.7 23.2 6.4 261.5 24.5
million
Fair value of investment 1,446.6 1,465.7 1,451.6 1.0 1,442.0
properties, EUR million
Net rental yield, % (2)) 6.4 6.3 6.3 6.5
Net rental yield, 6.5 6.6 6.4 6.5
like-for-like properties, %
1) Annualised potential rental value for the portfolio includes annualised gross
rent based on valid rent roll at the end of the period, market rent of vacant
premises and rental income from turnover based contracts (estimate) and possible
other rental income.
2) Includes the lots for development projects.
Sweden
Citycon has strengthened its position in the Swedish shopping centre market and
has eight shopping centres and seven other retail properties in Sweden, located
in the Greater Stockholm and Greater Gothenburg areas and in Umeå. The company's
net rental income from Swedish operations increased by 29.1 per cent to EUR 13.9
million (EUR 10.8 million). If the impact of the strengthened Swedish krona is
excluded, net rental income from Swedish operations increased by 16.4 per cent
on the previous year. The business unit accounted for 22.3 per cent of Citycon's
total net rental income.
The key figures for the Swedish property portfolio are presented below.
Development projects and changes in the property portfolio have been covered
previously in this document.
Lease Portfolio Summary, Sweden
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of leases started during 70 72 82 152 133 14.3 449
the period
Total area of leases started, 8,177 7,320 11,775 19,952 14,193 40.6 59,351
sq.m. (1))
Average rent of leases started 13.9 14.4 11.7 12.6 13.1 -3.8 23.6
(EUR/sq.m.) (1))
Number of leases ended during 61 81 209 270 149 81.2 318
the period
Total area of leases ended, 5,800 4,666 19,687 25,487 12,788 99.3 37,420
sq.m. (1))
Average rent of leases ended 7.7 19.4 11.2 10.4 12.9 -19.3 12.8
(EUR/sq.m.) (1))
Occupancy rate at end of the 94.4 95.6 94.4 1.3 94.7
period, %
Average remaining length of
lease portfolio at the end of 2.9 3.0 2.4 25.0 3.0
the period, year
(1) )Leases started and ended don't necessarily refer to the same premises.
Financial Performance, Sweden
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of properties 15 15 15 0.0 15
Gross leasable area, sq.m. 295,000 294,500 286,300 2.9 302,500
Annualised potential rental 52.3 52.8 39.4 34.2 48.8
value, EUR million 1)
Gross rental income, EUR 12.5 9.2 12.2 24.7 18.2 35.5 39.3
million
Turnover, EUR million 13.2 9.5 12.6 25.9 18.8 37.9 41.0
Net rental income, EUR million 7.6 5.6 6.4 13.9 10.8 29.1 23.2
Net fair value gains/losses on
investment property, EUR 10.0 -4.7 4.9 14.9 -1.3 - -19.6
million
Operating profit/loss, EUR 16.2 0.1 11.2 27.4 7.9 246.5 0.3
million
Capital expenditure, EUR 14.5 19.0 11.1 25.6 33.4 -23.4 95.9
million
Fair value of investment 583.8 601.0 496.8 21.0 548.8
properties, EUR million
Net rental yield, % (2)) 4.6 4.7 4.9 4.7
Net rental yield, 6.8 6.9 6.2 6.8
like-for-like properties, %
1) Annualised potential rental value for the portfolio includes annualised gross
rent based on valid rent roll at the end of the period, market rent of vacant
premises and rental income from turnover based contracts (estimate) and possible
other rental income.
2) Includes the lots for development projects.
Baltic Countries
Citycon owns three shopping centres in the Baltic countries: Rocca al Mare and
Magistral in Tallinn, Estonia, and Mandarinas in Vilnius, Lithuania. The
difficult economic situation in the Baltic countries has affected the sales of
Citycon's shopping centres and increased temporary rental rebates. At the same
time, the risk of credit loss has increased. The Baltic vacancy rate has,
however, not increased to any substantial degree during the period under review.
Net rental income from the Baltic operations amounted to EUR 5.8 million (EUR
4.6 million). The business unit accounted for 9.3 per cent of Citycon's total
net rental income.
The key figures for the Baltic property portfolio are presented below. No
changes took place in the Baltic property portfolio during the period nor were
there any development projects underway in the Baltic countries.
Lease Portfolio Summary, Baltic Countries
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of leases started during 2 67 4 6 68 -91.2 129
the period
Total area of leases started, 879 16,111 382 1,261 16,114 -92.2 25,057
sq.m. (1))
Average rent of leases started 17.1 24.3 19.8 17.9 24.3 -26.3 26.0
(EUR/sq.m.) (1))
Number of leases ended during the 4 40 3 7 51 -86.3 55
period
Total area of leases ended, sq.m. 541 6,745 520 1,061 8,140 -87.0 8,830
(1))
Average rent of leases ended 8.8 17.5 27.8 18.1 17.0 6.5 17.1
(EUR/sq.m.) (1))
Occupancy rate at end of the 98.8 99.5 99.9 -0.4 99.4
period, %
Average remaining length of lease
portfolio at the end of the 5.0 4.8 5.6 -14.3 5.2
period, year
(1) )Leases started and ended don't necessarily refer to the same premises.
Financial Performance, Baltic Countries
Q2/ Q2/ Q1/ Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 2010 2010 2009 %
Number of properties 3 3 3 0.0 3
Gross leasable area, sq.m. 71,000 71,000 70,100 1.3 71,000
Annualised potential rental 15.3 15.4 13.8 11.8 15.8
value, EUR million 1)
Gross rental income, EUR 3.4 3.3 3.6 7.0 6.3 10.3 12.0
million
Turnover, EUR million 4.2 3.5 4.3 8.6 6.6 29.1 14.0
Net rental income, EUR million 2.8 2.5 3.0 5.8 4.6 26.6 9.8
Net fair value gains/losses on
investment property, EUR 1.5 -0.7 -1.0 0.5 -10.3 - -12.7
million
Operating profit/loss, EUR 4.1 1.5 1.7 5.8 -6.2 - -3.8
million
Capital expenditure, EUR -1.8 5.7 7.5 5.7 11.0 -48.3 13.9
million
Fair value of investment 163.1 162.8 156.1 4.3 156.6
properties, EUR million
Net rental yield, % (2)) 7.0 7.1 6.4 6.4
Net rental yield, like-for-like 8.4 8.4 7.8 8.2
properties, %
1) Annualised potential rental value for the portfolio includes annualised gross
rent based on valid rent roll at the end of the period, market rent of vacant
premises and rental income from turnover based contracts (estimate) and possible
other rental income.
2) Includes the lots for development projects.
Turnover and Profit
The Citycon Group's turnover for the period came to EUR 98.1 million
(EUR 91.5 million), principally derived from the rental income generated by
Citycon's retail premises. Gross rental income accounted for 95.0 per cent
(96.5%) of turnover.
Operating profit came to EUR 79.6 million (EUR -4.7 million). Profit before
taxes was EUR 52.0 million (EUR -28.7 million) and profit after taxes
attributable to the parent company's shareholders was EUR 41.4 million (EUR
-23.8 million). The increase in operating profit was mainly due to the fair
value changes of the property portfolio. The operating profit also rose due to
the completion of (re)development projects, thanks to net rental income
generated by new and refurbished premises. Credit losses remained modest at EUR
0.5 million. Temporary rental rebates totalled EUR 1.6 million during the
period.
The effect of changes in the fair value of the property portfolio, of gains on
sale and other indirect items on the profit attributable to the parent company's
shareholders was EUR 19.9 million (EUR -48.0 million), tax effects included.
Taking this into account, the direct result after taxes was EUR 2.7 million
below the reference period level (cf. Note "Reconciliation between direct and
indirect result"). The decrease in the direct result came mainly from increased
administration and financial expenses. Administration expenses increased due to
some one-off expenses. Financial expenses in 2010 increased due to higher
interest expenses and the gain from the buybacks of convertible bonds recognised
in 2009.
Earnings per share were EUR 0.19 (EUR -0.11). Direct result per share, diluted,
(diluted EPRA EPS) came to EUR 0.10 (EUR 0.11). Net cash flow from operating
activities per share was EUR 0.05 (EUR 0.19).
Human Resources and Administrative Expenses
At the end of the period, Citycon Group employed a total of 124 (114) persons,
of whom 82 were employed in Finland, 34 in Sweden and eight in the Baltic
countries. Administrative expenses increased to EUR 10.2 million
(EUR 8.5 million), including EUR 0.3 million (EUR 0.1 million) of expenses
related to employee stock options and the company's share-based incentive
scheme.
Investments and Divestments
Citycon's reported gross capital expenditure in the period totalled
EUR 55.0 million (EUR 51.0 million). Of this, agreed purchase price adjustments
related to earlier concluded property acquisitions accounted for EUR 2.7 million
(EUR 0.0 million), property development for EUR 51.5 million (EUR 50.7 million)
and other investments for EUR 0.8 million (EUR 0.3 million). The investments
were financed through cash flow from operations, gains from divestments of
investment properties and existing financing arrangements.
During the period, the company has divested non-core properties in Finland and
Sweden for a total of around EUR 50 million and recorded a total of EUR 2.9
million in gains on sales, including tax effects. These divestments have been
covered in more detail above, under "Acquisitions and Divestments".
Statement of Financial Position and Financing
The total assets at the end of the period stood at EUR 2,308.9 million
(EUR 2,147.5 million). Liabilities totalled EUR 1,529.8 million
(EUR 1,370.2 million), with short-term liabilities accounting for
EUR 140.1 million (EUR 141.8 million). Citycon's financial position improved due
to signing of three new loan agreements. At the end of the period under review,
Citycon's liquidity was EUR 246.2 million, of which EUR 221.2 million consisted
of undrawn, committed credit facilities and EUR 25.0 million of cash and cash
equivalents. At the end of the accounting period, Citycon's liquidity, excluding
short-term credit limits and commercial papers, stood at EUR 204.7 million (31
December 2009: EUR 172.9 million).
For the purpose of short-term liquidity management, the company uses a EUR 100
million non-committed Finnish commercial paper programme and a non-committed
Swedish commercial paper programme worth SEK one billion. By the end of the
period, Citycon had issued commercial papers to the value of EUR 41.5 million.
Citycon's financing is mainly arranged on a long-term basis, with short-term
interest-bearing debt constituting approximately 6.7 per cent of the Group's
total interest-bearing debt at the end of the period.
Year-on-year, reported interest-bearing debt increased by 145.0 million to
EUR 1,385.6 million (EUR 1,240.6 million). The fair value of the
interest-bearing debt stood at EUR 1,394.7 million (EUR 1,251.6 million).
Cash and cash equivalents totalled EUR 25.0 million (EUR 16.7 million). The fair
value of the interest-bearing net debt stood at EUR 1,369.6 million
(EUR 1,234.8 million).
The year-to-date weighted average interest rate decreased compared to the
previous year and was 4.0 per cent (4.2%). The average loan maturity, weighted
according to the principal amount of the loans, stood at 3.3 years (4.2 years).
The average interest-rate fixing period was 3.2 years (3.1 years).
Citycon's interest cover ratio declined to 2.2x (Q1/2010: 2.3x). The company's
equity ratio covenant as defined in the loan agreements fell to 37.1 per cent
(Q1/2010: 39.2%) due to the maturity of the subordinated bond.
The weighted average interest rate, interest-rate swaps included, was
3.87 per cent on 30 June 2010.
At the end of the reporting period, Citycon's equity ratio was 33.8 per cent
(36.2%). Gearing stood at 174.6 per cent (157.4%).
At the end of the reporting period, Citycon's interest-bearing debt included
81.3 per cent (76.8%) of floating-rate loans, of which 77.4 per cent (70.1%) had
been converted to fixed-rate ones by means of interest-rate swaps. Fixed-rate
debt accounted for 81.6 per cent (77.1%) of the period-end interest-bearing
debt, interest-rate swaps included. The debt portfolio's hedging ratio is in
line with the company's financing policy. During the period, Citycon entered
into new hedges, but the hedging ratio was unchanged due to maturity of the
fixed rate subordinated bond.
Citycon applies hedge accounting, whereby changes in the fair value of
interest-rate swaps subject to hedge accounting are recognised under other
comprehensive income. The period-end nominal amount of interest-rate swaps
totalled EUR 877.3 million (EUR 673.5 million), with hedge accounting applied to
interest-rate swaps whose nominal amount totalled EUR 851.0 million
(EUR 650.4 million).
On 30 June 2010, the nominal amount of all of the company's derivative contracts
totalled EUR 877.3 million (EUR 678.3 million) and their fair value was
EUR -45.7 million (EUR -26.2 million). The decline of market interest rates
decreased the fair value of Citycon's interest rate derivatives. Hedge
accounting is applied to the majority of interest rate derivatives, meaning that
any changes in their fair value will be recognised under other comprehensive
income. Thereby, the fair value loss for these derivatives does not affect the
profit for the period or the earnings per share, but the total comprehensive
income. During the period, the fair value loss recognised under other
comprehensive income, taking account of the tax effect, totalled EUR -9.9
million (EUR -4.4 million).
Net financial expenses totalled EUR 27.6 million (EUR 24.0 million). This
increase was mainly attributable to increased interest expenses as a result of
lower capitalisation of interest expenses and higher amount of interest-bearing
debt. In addition, the net financial expenses in the statement of comprehensive
income include EUR 0.7 million (EUR 0.7 million) in non-cash expenses related to
the option component on convertible bonds.
Loan Market Transactions
Loan Agreements
During the period, Citycon entered into three loan agreements, each worth EUR
50 million and maturing in five years. New loans strengthen the company's
available liquidity and enable it to finance its growth on a long-term basis.
The loans will be used to finance investments complying with the company's
strategy, such as shopping centre (re)development projects, and to refinance
maturing loans.
Buybacks of Convertible Bonds
During the period under review, Citycon repurchased its subordinated convertible
capital bonds issued on 2 August 2006 for an aggregate consideration of EUR 3.4
million (including accrued interest). The transaction was conducted in 26 May
2010. The repurchased principal amount of EUR 3.75 million corresponds to a
total of 75 bonds with a face value of EUR 50,000, representing some three per
cent of the aggregate amount of the convertible bonds maturing in 2013. These
repurchased bonds were cancelled on 15 June 2010. Consequently, the number of
shares available for subscription under the convertible bonds decreased to
17,321,428 and the maximum increase allowed in Citycon's share capital decreased
to EUR 23,383,927.80. The amendments to Citycon's convertible bonds were
registered in the Trade Register on 29 June 2010.
Including the buybacks between 28 October 2008 and 10 March 2009, Citycon has
repurchased a total principal amount of EUR 37.25 million of the convertible
bonds, corresponding to approximately 33.9 per cent of the aggregate amount of
the convertible bonds. The weighted average repurchase price was 56.9 per cent
of the face value of the bonds. The repurchases of the bonds were executed in
accordance with term 7 (f) of the convertible bonds' terms and conditions, on
the open market. These repurchases were conducted because the market situation
allowed the company to repurchase the bonds at a price below their face value
and because the repurchases enable the company to strengthen its financial
position and to cut its net financial expenses.
Short-term Risks and Uncertainties
For risk management purposes, Citycon has a holistic Enterprise Risk Management
(ERM) programme in place. The aim of risk management is to ensure that the
company meets its business targets. The ERM's purpose is to generate updated and
consistent information for the company's senior executives and Board of
Directors on any risks threatening the targets set in the strategic and annual
plans. More details on the company's risk management and risk management
principles are available on the corporate website at
www.citycon.com/riskmanagement and on pages 32-34 of the Financial Statements
2009.
Citycon's Board of Directors estimates that major short-term risks and
uncertainties are associated with economic developments in the company's
operating regions, the cost of debt financing, changes in the fair value of
investment properties and the execution of redevelopment projects.
Economic fluctuations and trends have a significant influence on demand for
leasable premises as well as rental levels. These constitute one of the key
near-term risks for the company. Economic growth has decelerated distinctly in
all of the company's operating areas since 2008, and many economists predict
that growth will remain modest in 2010 in Finland, Sweden and the Baltic
countries. In addition, unemployment is expected to stay at above-normal levels
while inflation remains low. Such an economic development might reduce demand
for retail premises, weaken the lessees' ability to pay rent, increase the
vacancy rate and limit opportunities for increasing rents.
The refurbishment and redevelopment of retail properties is an integral part of
Citycon's growth strategy. Implementation of this strategy requires both equity
and debt financing. The financial market weakened markedly in 2008 and the
situation remained challenging throughout 2009. Banks' willingness to lend money
to enterprises improved during the period under review, but has not recovered to
pre-crisis levels. Moreover, the margins of long-term unsecured bank loans, in
particular, have remained high. If stricter regulations for banks are realised
in the future, this may lead to the maintenance of abnormally high costs for
financing provided by banks. Citycon's financial position is good. At the end of
the period, the company's available liquidity totalled EUR 246.2 million,
consisting mainly of committed long-term credit limits and cash and cash
equivalents. Citycon is capable of financing its current projects in their
entirety as planned.
A number of factors contribute to the value of retail properties, such as
general and local economic development, demand among property investors and
interest rates. Investment property value trends are subject to untypical levels
of uncertainty due to the challenging economic situation and increased
unemployment throughout the company's operating areas. In recent years, retail
property values have declined, with Citycon recognising fair value losses on its
investment properties during the financial years 2008 and 2009. In 2010,
however, Citycon has recognised fair value gains. Trading activity in the
property market remained at low levels during 2009 and the first half of 2010.
While changes in properties' fair value have an effect on the company's profit
for the period under review, they do not have an immediate impact on cash flow.
A key element in Citycon's strategy lies in the development of existing
properties to meet the lessees' needs more effectively. The most central
short-term risk related to development projects includes leasing new premises in
the currently difficult economic environment. Citycon is preparing major
development projects throughout its operating countries, meaning - if all of
these projects are carried out - that the leasable area within the company's
shopping centres will increase significantly in the forthcoming years.
Successful implementation of these new development projects is of primary
importance as regards Citycon's financial development and growth. The key risk
involves demand for retail premises as well as market rent levels in an
environment characterised by slow economic growth. At this very moment,
relatively low construction costs would favour launching new projects but, on
the other hand, in order for new projects to be viable, they require attaining a
sufficient rate of pre-leasing with sufficient rental levels.
Environmental Responsibility
Citycon seeks to lead the way in responsible shopping centre business and to
promote sustainable development within the business. The location of Citycon's
shopping centres in city centres, local centres or generally adjacent to major
traffic flows, combined with excellent public transport connections, means that
they are well positioned to face the demands of sustainable development.
Citycon has initiated a Green Shopping Centre Management programme to foster
sustainable development in all Citycon shopping centres. The programme was
implemented in 2009, and it aims to improve energy efficiency, recycling and
other operations that support sustainable development. Citycon's shopping
centres were evaluated under the Green Shopping Centre Management programme
during the second quarter of the year. According to this evaluation, all
shopping centres showed improvement with respect to the various elements of
sustainable development from the previous year.
In late March, the Liljeholmstorget shopping centre was awarded the platinum
LEED® (Leadership in Energy and Environmental Design) environmental certificate,
the highest of its kind. Liljeholmstorget's certificate is the first
platinum-level certificate awarded to a shopping centre in Europe. The Rocca al
Mare shopping centre, in turn, was awarded a silver LEED environmental
certificate in January, the first of its kind in the Baltic countries. The Trio
shopping centre already received its certificate in June 2009, being the first
to do so in the Nordic countries. All three projects were Citycon's pilot
projects in sustainable construction. Certification forms an essential element
of Citycon's efforts towards sustainable development.
Citycon defined its long-term strategic objectives related to environmental
responsibility in connection with its strategic planning in the summer of 2009.
These are presented in the company's first combined Annual and Corporate Social
Responsibility Report for 2009, which was published in March. The report also
describes the company's economic, social and environmental responsibility
towards its various stakeholders, applying the recommendations of the Global
Reporting Initiative (GRI) on the content and principles of corporate
responsibility reporting. For the first time, Citycon also included data on its
environmental performance, with key figures on energy and water consumption,
waste recycling rates and the carbon footprint of the company's business
operations. These key figures are used for specifying site-specific action plans
to help promote the company's environmental performance goals.
The Green Building Council Finland (FIGBC) was established in April, with
Citycon as one of its founding members. The FIGBC's mission includes promoting
sustainable development practices related to built-up environments and
environmental classification, connecting Finland into the international network
of the Green Building Council, sharing knowledge and expertise as well as
generating dialogue and discussion. Citycon's CEO Petri Olkinuora was elected
onto the association's first Board.
Annual General Meeting 2010
Citycon Oyj's Annual General Meeting (AGM) was held in Helsinki on 11 March
2010. The AGM adopted the company's financial statements and discharged the
members of the Board of Directors and the Chief Executive Officer from liability
for the financial year 2009. The AGM decided on a dividend of EUR 0.04 per share
for the financial year 2009 and, in addition, on an equity return of
EUR 0.10 per share from the invested unrestricted equity fund. The record date
for the dividend payout and equity return was 16 March 2010, and the dividend
and equity return were paid on 7 April 2010. Other decisions made by the Annual
General Meeting have been reported in the interim report published on 20 April
2010.
Extraordinary General Meeting 2010
Citycon Oyj's Extraordinary General Meeting (EGM) took place in Helsinki on 17
May 2010. The EGM decided that the number of Board members should be ten and
elected Chaim Katzman to the company's Board of Directors for a term expiring at
the end of the next Annual General Meeting.
As proposed by the Board of Directors, the EGM also decided to amend the second
paragraph of Article 4 of the Articles of Association so that instead of one
Deputy Chairman, the Board of Directors elects one or more Deputy Chairmen from
among its members. This amendment to the Articles of Association was recorded in
the Trade Register on 24 May 2010.
In addition, the EGM decided, in line with a proposal from the Board's
Nomination Committee, to amend the decision made by the AGM of 11 March 2010 on
the remuneration of Board members, pertaining to the annual remuneration paid to
a Deputy Chairman, in such a way that the one or more Deputy Chairmen of the
Board will each be paid an annual remuneration of EUR 60,000.
Chaim Katzman was elected Chairman of the company's Board of Directors at the
Board meeting held on 15 June 2010.
Shareholders, Share Capital and Shares
Trading and Share Performance
During January-June, the number of Citycon shares traded on the NASDAQ OMX
Helsinki totalled 57.9 million (92.7 million) at an overall value of
EUR 159.9 million (EUR 150.2 million). The highest quotation during the period
was EUR 3.15 (EUR 2.02), and the lowest EUR 2.29 (EUR 1.30). The reported
trade-weighted average price was EUR 2.76 (EUR 1.62), and the share closed at
EUR 2.42 (EUR 1.86). At the end of June, the company's market capitalisation
totalled EUR 538.6 million (EUR 411.2 million).
Shareholders
Citycon had a total of 4,145 (3,160) registered shareholders at the end of June,
of which nine were account managers of nominee-registered shares.
Nominee-registered and other international shareholders held 195.8 million
(202.6 million) shares, or 88.0 per cent (91.6%) of the company's share capital
and voting rights.
Notifications of Changes in Shareholdings
The company has not received any notifications of changes in shareholdings
during the reporting period.
Share Capital
At the end of June 2010, the company's registered share capital totalled EUR
259,570,510.20 and the number of shares was 222,564,972. During the period,
there were no changes in the company's share capital but the number of shares
grew by 1,301,217 as a result of share subscriptions made by exercising option
rights and by 204,020 shares which the company issued through directed, free
share issues in May as part of its long-term, share-based incentive plan. In
total, the number of shares increased by 1,505,237 shares. The company has a
single series of shares, with each share entitling the holder to one vote at
general meetings of shareholders. The shares have no nominal value.
Board Authorisations
Under a share issue authorisation granted by the AGM of 2007, the Board of
Directors can still decide on a maximum of 72,033,412 shares to be issued or
treasury shares to be conveyed. Based on this authorisation, the Board may also
decide on the granting of stock options and other special rights. This
authorisation is valid until 13 March 2012.
The 2010 AGM authorised the Board of Directors to decide on the acquisition of
20 million of the company's own shares. This acquisition authorisation will be
valid until the next Annual General Meeting.
At period-end, the Board of Directors had no other authorisations.
Own Shares
During the reporting period, the company conveyed a total of 80,000 own shares
which it had directed to itself as part of the company's long-term, share-based
incentive plan. The shares were conveyed in transactions on 1-2 June 2010,
through public trading on the NASDAQ OMX Helsinki. Further details on the
transactions can be found in the releases published on 1 and 2 June by the
company on its website at www.citycon.com. The company had no treasury shares at
the end of the reporting period.
Stock Options 2004
The Annual General Meeting held on 15 March 2004 authorised the issue of a
maximum of 3,900,000 stock options to the personnel of the Citycon Group. The
stock options are listed on the NASDAQ OMX Helsinki exchange.
The subscription period for Citycon's stock options 2004 B expired at the end of
March. A total of 1,301,217 shares were subscribed with these options, all of
them in the period of January-March. The subscription price received by the
company for these shares, a total of EUR 3.3 million, has been recorded in the
invested unrestricted equity fund, in accordance with the terms and conditions
of the stock options.
The number of unexercised outstanding stock options 2004 B totalled 17,002.
These stock options were deleted as worthless from their holders' book-entry
accounts.
The enclosed table includes information on the remaining stock options 2004. The
full terms and conditions of the stock option plan are available on the
corporate website at www.citycon.com/options.
Basic Information on Stock Options 2004 as at 30 June 2010
2004 C
No. of options granted 1,050,000
No. held by Veniamo-Invest Oy ¹) 250,000
Subscription ratio, option/shares 1:1.2127
Subscription price per share, EUR ²) 4.2213
Subscription period began 1.9.2008
Subscription period ends 31.3.2011
No. of options exercised -
No. of shares subscribed with options -
No. of options available for share subscription 1,050,000
No. of shares that can be subscribed 1,273,335
¹) Veniamo-Invest Oy, a wholly-owned subsidiary of Citycon Oyj, cannot subscribe
for its parent company's shares.
²) Following the dividend payment and equity return in 2010. The share
subscription price is reduced by half of the per-share dividends paid and
per-share equity returned.
Events after the Accounting Period
In July 2009, Citycon agreed to sell premises, mainly consisting of apartments,
located at Åkersberga Centrum for a price of about SEK 181 million (approx. EUR
19 million) to the Swedish investment company Tegeltornet AB. The sale was
finalised in early July. This transaction has no effect on reported profits.
Outlook
Citycon continues to focus on increasing its net cash from operating activities
and direct operating profit. In order to implement this strategy, the company
will pursue value-added activities while cautiously monitoring the market for
potential acquisitions.
Due to the uncertainty on the markets, the initiation of planned projects will
be carefully evaluated against strict pre-leasing criteria. Citycon intends to
continue the divestment of its non-core properties to improve the property
portfolio and strengthen the company's financial position. The company is also
considering alternative property financing sources.
In 2010, Citycon's turnover is expected to grow by approximately 3-7 per cent
and direct operating profit by approximately 1-4 per cent compared with the
previous year, based on the existing portfolio. The company expects its direct
result to be moderately lower than in the previous year. The estimate is based
on completed (re)development projects and the prevailing low inflation level. In
addition, properties taken offline for planned (re)development projects will
reduce net rental income during the year.
The change in outlook regarding direct result and direct operating profit (from
3-6 per cent to 1-4 per cent) is due mainly to slower stabilisation and
development of certain projects.
Helsinki, 13 July 2010
Citycon Oyj
Board of Directors
Interim Condensed Consolidated Financial Statements
1 January - 30 June 2010
Condensed Consolidated Statement of Comprehensive Income, IFRS
EUR million Q2/ Q2/ Change- Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 % 2010 2009 %
Gross rental income 46.0 43.9 4.7% 93.2 88.2 5.6% 177.8
Service charge income 2.6 1.7 56.6% 4.9 3.2 51.9% 8.5
Turnover (Note 3) 48.6 45.6 6.6% 98.1 91.5 7.3% 186.3
Property operating expenses 16.1 14.4 11.7% 34.9 29.8 17.1% 60.2
(Note 4)
Other expenses from leasing 0.6 0.2 301.1% 0.7 0.4 113.1% 0.7
operations
Net rental income 31.8 31.0 2.7% 62.5 61.3 1.8% 125.4
Administrative expenses 5.8 3.9 47.1% 10.2 8.5 20.6% 17.8
Other operating income and 0.0 0.0 - 0.1 0.0 - 0.0
expenses
Net fair value gains/losses on 22.9 -26.0 - 23.7 -57.6 - -97.4
investment property
Net gains on sale of investment 0.3 0.0 - 3.5 0.1 - 0.1
property
Operating profit/loss 49.2 1.1 - 79.6 -4.7 - 10.3
Net financial income and -14.4 -11.8 22.4% -27.6 -24.0 14.7% -47.7
expenses
Profit/loss before taxes 34.8 -10.7 - 52.0 -28.7 - -37.5
Current taxes -1.9 -1.5 25.9% -4.3 -3.3 33.1% -6.5
Change in deferred taxes 0.0 4.5 -100.7% -0.5 6.0 - 7.0
Profit/loss for the period 32.8 -7.7 - 47.1 -26.0 - -36.9
Profit/loss attributable to
Parent company shareholders 28.4 -7.0 - 41.4 -23.8 - -34.3
Minority interest 4.4 -0.7 - 5.8 -2.2 - -2.6
Earnings per share attributable
to parent company shareholders
Earnings per share (basic), EUR 0.13 -0.03 - 0.19 -0.11 - -0.16
(Note 6)
Earnings per share (diluted), 0.12 -0.03 - 0.18 -0.11 - -0.16
EUR (Note 6)
Direct result (Note 5) 10.1 12.6 -19.5% 21.5 24.2 -11.2% 50.9
Indirect result (Note 5) 18.3 -19.5 - 19.9 -48.0 - -85.2
Profit/loss for the period
attributable to 28.4 -7.0 - 41.4 -23.8 - -34.3
parent company shareholders
Other comprehensive
expenses/income
Net losses on cash flow hedges -4.5 4.8 - -13.4 -6.0 125.1% -6.7
Income taxes relating to cash 1.2 -1.2 - 3.5 1.6 125.1% 1.8
flow hedges
Exchange gains/losses on 0.4 0.4 12.0% 1.3 0.2 - 2.0
translating foreign operations
Other comprehensive expenses
/income for the period, net of -2.9 3.9 - -8.6 -4.2 105.1% -3.0
tax
Total comprehensive profit/loss 29.9 -3.8 - 38.5 -30.2 - -39.9
for the period
Total comprehensive profit/loss
attributable to
Parent company shareholders 23.9 -3.2 - 31.2 -28.1 - -38.4
Minority interest 6.0 -0.6 - 7.3 -2.1 - -1.4
Condensed Consolidated Statement of Financial Position, IFRS
EUR million Note 30 June 2010 30 June 2009 31 Dec. 2009
Assets
Non-current assets
Investment properties 7 2,229.5 2,104.5 2,147.4
Intangible assets and property, 2.0 1.6 1.6
plant and equipment
Deferred tax assets 12.2 8.3 8.6
Derivative financial instruments and 10 0.0 0.0 3.8
other non-current assets
Total non-current assets 2,243.8 2,114.5 2,161.4
Current assets
Investment properties held for sale 8 19.0 - 26.0
Derivative financial instruments 10 1.0 5.8 -
Trade and other receivables 20.2 10.5 46.1
Cash and cash equivalents 9 25.0 16.7 19.8
Total current assets 65.1 33.0 91.8
Total assets 2,308.9 2,147.5 2,253.2
Liabilities and Shareholders' Equity
Equity attributable to parent
company shareholders
Share capital 259.6 259.6 259.6
Share premium fund 131.1 131.1 131.1
Fair value reserve 10 -32.6 -22.1 -22.7
Invested unrestricted equity fund 11 136.6 155.2 155.2
Retained earnings 11 240.3 217.4 207.8
Total equity attributable to parent 735.0 741.3 731.1
company shareholders
Minority interest 44.1 36.1 36.8
Total shareholders' equity 779.1 777.4 767.9
Long-term liabilities
Long-term interest-bearing debt 12 1,292.8 1,145.3 1,175.4
Derivative financial instruments and
other non-interest bearing 10 46.3 32.1 32.5
liabilities
Deferred tax liabilities 50.7 51.0 50.0
Total long-term liabilities 1,389.7 1,228.4 1,257.9
Short-term liabilities
Short-term interest-bearing debt 12 92.8 95.3 146.3
Derivate financial instruments 10 1.3 1.1 1.5
Trade and other payables 46.0 45.4 79.7
Total short-term liabilities 140.1 141.8 227.4
Total liabilities 1,529.8 1,370.2 1,485.3
Total liabilities and shareholders' 2,308.9 2,147.5 2,253.2
equity
Condensed Consolidated Cash Flow Statement, IFRS
EUR million Note Q1-Q2/ Q1-Q2/ 2009
2010 2009
Cash flow from operating activities
Profit/loss before taxes 52.0 -28.7 -37.5
Adjustments 0.7 81.9 145.7
Cash flow before change in working capital 52.7 53.1 108.3
Change in working capital -6.3 8.0 10.7
Cash generated from operations 46.4 61.1 119.0
Paid interest and other financial charges -26.7 -27.6 -54.4
Interest income and other financial income received 0.0 0.2 0.3
Realized exchange rate losses/gains -3.3 11.8 11.8
Taxes paid -5.8 -3.7 -10.4
Net cash from operating activities 10.7 41.7 66.2
Cash flow from investing activities
Acquisition of subsidiaries, less cash acquired 7 - - -
Acquisition of investment properties 6 - - -
Capital expenditure on investment properties as well 7 -53.5 -52.1 -130.9
as on intangible assets and PP&E
Sale of investment properties 7, 8 47.3 3.1 3.1
Net cash used in investing activities -6.2 -49.0 -127.9
Cash flow from financing activities
Sale of treasury shares 0.2 0.0 -
Share subscriptions based on stock options 3.3 - -
Proceeds from short-term loans 12 61.1 86.5 149.7
Repayments of short-term loans 12 -116.7 -41.5 -77.1
Proceeds from long-term loans 12 179.2 142.1 295.1
Repayments of long-term loans 12 -96.3 -149.0 -273.0
Dividends and return from the invested unrestricted 11 -31.0 -30.9 -30.9
equity fund
Net cash from financing activities -0.2 7.2 63.8
Net change in cash and cash equivalents 4.3 -0.1 2.1
Cash and cash equivalents at period-start 9 19.8 16.7 16.7
Effects of exchange rate changes 1.0 0.1 1.0
Cash and cash equivalents at period-end 9 25.0 16.7 19.8
Condensed Consolidated Statement of Changes in Shareholders' Equity, IFRS
Equity attributable to parent company shareholders
Invested
Share Share Fair un- Trans- Retained
capital premium value restricted lation earnings
fund reserve equity reserve
fund
Balance at 1 Jan. 2009 259.6 131.1 -17.7 177.3 -10.3 259.1
Total comprehensive -4.4 0.1 -23.8
loss/profit for the period
Recognized gain in the
equity arising from 1.1
convertible bond buybacks
Sale of treasury shares 0.0
Dividends and return from
the invested unrestricted -22.1 -8.8
equity fund (Note 11)
Share-based payments 0.1
Balance at 30 June 2009 259.6 131.1 -22.1 155.2 -10.2 227.7
Balance at 1 Jan. 2010 259.6 131.1 -22.7 155.2 -9.5 217.3
Total comprehensive -9.9 -0.2 41.4
loss/profit for the period
Share subscriptions based on 3.3
stock options
Recognized gain in the
equity arising from 0.0
convertible bond buybacks
Sale of treasury shares 0.2
Recognized gain in the
equity arising from
convertible bond buybacks
Sale of treasury shares
Dividends and return from
the invested unrestricted -22.1 -8.8
equity fund (Note 11)
Share-based payments 0.2
Balance at 30 June 2010 259.6 131.1 -32.6 136.6 -9.7 250.0
Equity Share-
attributable to Minority holders'
parent interest equity,
company total
shareholders
Balance at 1 Jan. 2009 799.1 38.2 837.3
Total comprehensive loss/profit for the period -28.1 -2.1 -30.2
Recognized gain in the equity arising from 1.1 1.1
convertible bond buybacks
Sale of treasury shares 0.0 0.0
Dividends and return from the invested -30.9 -30.9
unrestricted equity fund (Note 11)
Share-based payments 0.1 0.1
Balance at 30 June 2009 741.3 36.1 777.4
Balance at 1 Jan. 2010 731.1 36.8 767.9
Total comprehensive loss/profit for the period 31.2 7.3 38.5
Share subscriptions based on stock options 3.3 3.3
Recognized gain in the equity arising from 0.0 0.0
convertible bond buybacks
Sale of treasury shares 0.2 0.2
Dividends and return from the invested -30.9 -30.9
unrestricted equity fund (Note 11)
Share-based payments 0.2 0.2
Balance at 30 June 2010 735.0 44.1 779.1
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basic Company Data
Citycon is a real estate company investing in retail premises. Citycon operates
mainly in Finland, Sweden and the Baltic countries. Citycon is a Finnish public
limited liability company established under Finnish law and domiciled in
Helsinki. The Board of Directors has approved the interim financial statements
on 13 July 2010.
2. Basis of Preparation and Accounting Policies
Citycon prepares its consolidated financial statements in accordance with the
International Financial Reporting Standards (IFRS). The interim financial
statements for the six months ended 30 June 2010 have been prepared in
accordance with IAS 34 Interim Financial Reporting. The following amendments and
interpretations to the existing standards have been adopted in the interim
financial statements: IAS 27 (revised) Consolidated and separate financial
statements and IFRS 3 (revised) Business Combinations. Additional information on
the new standards as well as on the amendments and interpretations to the
existing standards are available in Citycon's Financial Statements 2009, in
Chapter 3 "Changes in IFRS and accounting policies" under the Notes to the
Consolidated Financial Statements (see pages 18-19 in the Financial Statements).
Otherwise, same accounting principles and policies are followed in the interim
financial statements as in the annual financial statements for the year 2009.
The interim financial statements do not include all the disclosures required in
the annual financial statements. Therefore, they should be read in conjunction
with Citycon's annual financial statements for the year 2009.
3. Segment Information
Citycon's business consists of the regional business units Finland, Sweden and
the Baltic Countries.
EUR million Q2/ Q2/ Change Q1-Q2/ Q1-Q2/ Change 2009
2010 2009 -% 2010 2009 -%
Turnover
Finland 31.1 32.6 -4.5% 63.7 66.1 -3.7% 131.3
Sweden 13.2 9.5 40.0% 25.9 18.8 37.9% 41.0
Baltic Countries 4.2 3.5 19.6% 8.6 6.6 29.1% 14.0
Total 48.6 45.6 6.6% 98.1 91.5 7.3% 186.3
Net rental income
Finland 21.5 22.9 -6.3% 42.7 46.0 -7.0% 92.4
Sweden 7.6 5.6 35.4% 13.9 10.8 29.1% 23.2
Baltic Countries 2.8 2.5 11.6% 5.8 4.6 26.6% 9.8
Other 0.0 0.0 - 0.0 0.0 - 0.0
Total 31.8 31.0 2.7% 62.5 61.3 1.8% 125.4
Direct operating profit/loss
Finland 19.8 21.4 -7.8% 40.3 42.9 -6.0% 86.3
Sweden 6.2 4.8 27.7% 11.7 9.2 26.6% 20.0
Baltic Countries 2.6 2.2 17.4% 5.3 4.1 29.2% 8.8
Other -2.2 -1.4 57.6% -4.6 -3.4 34.4% -7.4
Total 26.3 27.1 -2.7% 52.7 52.8 -0.2% 107.7
Operating profit/loss
Finland 31.2 1.0 - 50.9 -3.0 - 21.2
Sweden 16.2 0.1 - 27.4 7.9 - 0.3
Baltic Countries 4.1 1.5 174.4% 5.8 -6.2 - -3.8
Other -2.2 -1.4 55.9% -4.6 -3.4 33.8% -7.4
Total 49.2 1.1 - 79.6 -4.7 - 10.3
EUR million
Assets 30 June 2010 30 June 2009 Change-% 31 Dec. 2009
Finland 1,473.6 1 455.7 1.2% 1 455.5
Sweden 630.1 501.3 25.7% 605.7
Baltic Countries 163.7 157.5 4.0% 157.6
Other 41.5 33.1 25.5% 34.3
Total 2,308.9 2,147.5 7.5% 2,253.2
The change in segment assets was due to the fair value changes in investment
properties as well as investments and disposals.
4. Property Operating Expenses
EUR million Q2/ Q2/ Change- Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 % 2010 2009 %
Heating and electricity 4.5 4.4 3.5% 11.7 10.5 11.1% 20.2
Maintenance expenses 6.3 5.0 26.6% 12.3 9.6 27.5% 20.1
Property personnel expenses 0.1 0.1 117.4% 0.3 0.3 19.4% 0.5
Administrative and management fees 0.6 0.7 -6.6% 1.2 1.3 -7.1% 2.5
Marketing expenses 1.4 1.1 28.1% 2.5 1.7 50.3% 4.4
Property insurances 0.2 0.2 -16.2% 0.3 0.4 -13.0% 0.7
Property taxes 1.5 1.2 23.7% 2.9 2.4 21.3% 4.7
Repair expenses 1.5 1.9 -18.9% 3.6 3.7 -1.5% 6.9
Other property operating expenses 0.0 0.0 -48.3% 0.1 0.0 - 0.1
Total 16.1 14.4 11.7% 34.9 29.8 17.1% 60.2
5. Reconciliation between Direct and Indirect Result
Due to the nature of Citycon's business and the obligation to apply IFRS, the
consolidated statement of comprehensive income includes several items related to
non-operating activities. In addition to the consolidated statement of
comprehensive income under IFRS, Citycon also presents its profit/loss
attributable to parent company shareholders with direct result and indirect
result separately specified, in an attempt to enhance the transparency of its
operations and to facilitate comparability of reporting periods. Direct result
describes the profitability of the Group's operations during the reporting
period disregarding the effects of fair value changes, gains or losses on sales,
other extraordinary items and other comprehensive income items. Earnings per
share calculated based on direct result corresponds to the earnings per share
definition recommended by EPRA.
Direct result excludes the changes in fair value of financial instruments that
are recognized in the statement of comprehensive income under net financial
income and expenses. In order to hedge against interest rate risk, Citycon has
entered into, in accordance with its interest rate risk management policy,
interest rate and inflation derivatives which do not qualify under hedge
accounting treatment under IFRS. Changes in fair value of such derivatives are
recognized in the statement of comprehensive income under net financial income
and expenses. These derivatives hedge the group against interest rate risk and
in accordance with the terms of the derivatives Citycon receives floating money
market interest rate which has a matching interest rate determination procedure
with group's floating rate debt. The interest rate which Citycon pays under
these derivatives does not depend on the money market interest rate which means
that these derivatives hedge Citycon against rising floating interest rates. The
aim is to ensure effectiveness of the hedges by matching the interest rate
fixing procedure between the derivatives recognized in the statement of
comprehensive income under net financial income and expenses and floating rate
debt of Citycon.
EUR million Q2/ Q2/ Change- Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 % 2010 2009 %
Direct result
Net rental income 31.8 31.0 2.7% 62.5 61.3 1.8% 125.4
Direct administrative expenses -5.5 -3.9 40.3% -9.8 -8.5 15.6% -17.7
Direct other operating income 0.0 0.0 - 0.1 0.0 - 0.0
and expenses
Direct operating profit 26.3 27.1 -2.7% 52.7 52.8 -0.2% 107.7
Direct net financial income and -14.2 -12.1 17.2% -27.1 -24.1 12.5% -47.7
expenses
Direct current taxes -1.4 -1.5 -10.7% -3.2 -3.0 7.4% -6.2
Change in direct deferred taxes -0.1 -0.2 -69.0% 0.1 -0.2 - -0.2
Direct minority interest -0.6 -0.7 -10.6% -1.0 -1.4 -28.2% -2.8
Total direct result 10.1 12.6 -19.5% 21.5 24.2 -11.2% 50.9
Direct result per share
(diluted), 0.05 0.06 -18.3% 0.10 0.11 -10.3% 0.23
(diluted EPRA EPS), EUR( 1))
Indirect result
Net fair value gains/losses on 22.9 -26.0 - 23.7 -57.6 - -97.4
investment property
Profit on disposal of investment 0.3 - - 3.5 0.1 - 0.1
property
Indirect administrative expenses -0.3 - - -0.4 - - -0.1
Indirect other operating income - - - 0.0 - - 0.0
and expenses
Movement in fair value of -0.3 0.3 - -0.5 0.0 - -0.1
financial instruments
Indirect current taxes -0.6 - -1.2 -0.3 - -0.3
Change in indirect deferred 0.0 4.7 - -0.6 6.2 - 7.3
taxes
Indirect minority interest -3.8 1.4 - -4.7 3.6 - 5.3
Total indirect result 18.3 -19.5 - 19.9 -48.0 - -85.2
Indirect result per share, 0.08 -0.09 - 0.08 -0.22 - -0.39
diluted
Profit/loss for the period
attributable to 28.4 -7.0 - 41.4 -23.8 - -34.3
parent company shareholders
¹) The calculation of the direct result per share is presented in the Note 6
"Earnings per Share".
6. Earnings per Share
Q1-Q2/ Q1-Q2/ 2009
2010 2009
A) Earnings per share calculated from
the profit/loss for the period
Earnings per share, basic
Profit/loss attributable to parent 41.4 -23.8 -34.3
company shareholders, EUR million
Issue-adjusted average number of 221.8 221.0 221.0
shares, Million
Earnings per share (basic), EUR 0.19 -0.11 -0.16
Earnings per share, diluted
Profit/loss attributable to parent 41.4 -23.8 -34.3
company shareholders, EUR million
Expenses from convertible capital
loan, the tax effect deducted, EUR 2.1 - -
million
Profit/loss used in the calculation
of diluted earnings per share, EUR 43.5 -23.8 -34.3
million
Issue-adjusted average number of 221.8 221.0 221.0
shares, Million
Convertible capital loan impact, 18.0 - -
Million
Adjustment for stock options, Million 0.0 - -
Adjustments for long-term share-based 0.2 - -
incentive plan
Issue-adjusted average number of
shares used in the calculation of 240.0 221.0 221.0
diluted earnings per share, Million
Earnings per share (diluted), EUR 0.18 -0.11 -0.16
The incremental shares from assumed conversions or any income or cost related to
dilutive potential shares are not included in calculating 2009 diluted per-share
figures because the profit attributable to parent company shareholders was
negative.
B) Earnings per share calculated from
the direct result for the period
Direct result per share (diluted),
(diluted EPRA EPS)
Direct result, EUR million (Note 5) 21.5 24.2 50.9
Expenses arising from convertible
capital loan, adjusted with the tax 2.1 2.1 4.2
effect deduction, EUR million
Profit used in the calculation of 23.6 26.2 55.1
direct result per share, EUR million
Issue-adjusted average number of 221.8 221.0 221.0
shares, Million
Convertible capital loan impact, 18.0 18.8 18.5
Million
Adjustment for stock options, Million 0.0 - -
Adjustments for long-term share-based 0.2 0.1 0.0
incentive plan
Issue-adjusted average number of
shares used in the calculation of 240.0 239.8 239.5
diluted earnings per share, Million
Direct result per share (diluted), 0.10 0.11 0.23
(diluted EPRA EPS), EUR
7. Investment Property
Citycon divides its investment properties into two categories: investment
properties under construction (IPUC) and operative investment properties. At 30
June 2010 the first mentioned category included Espoontori, Jyväskylän Forum,
Kirkkonummen Liikekeskus, Lahden Hansa, Myllypuro, Martinlaakso and Myyrmanni in
Finland as well as Åkersberga in Sweden.
EUR million 30 June 2010
Investment Operative Investment
properties under investment properties
construction (IPUC) properties total
At period-start 269.8 1,877.6 2,147.4
Acquisitions 2.0 0.7 2.7
Investments 25.8 24.2 50.0
Disposals -3.3 -34.4 -37.7
Capitalized interest 0.7 0.9 1.6
Fair value gains on investment 11.0 37.2 48.1
property
Fair value losses on investment -17.1 -7.3 -24.4
property
Exchange differences 2.9 38.9 41.8
Transfers between items 47.4 -47.4 0.0
At period-end 339.1 1,890.4 2,229.5
EUR million 30 June 2009
Investment Operative Investment
properties under investment properties
construction (IPUC) properties total
At period-start 271.8 1,839.9 2,111.6
Acquisitions - - -
Investments 42.4 4.3 46.7
Disposals - -2.7 -2.7
Capitalized interest 3.6 0.3 4.0
Fair value gains on investment 7.1 1.5 8.6
property
Fair value losses on investment -12.4 -53.8 -66.2
property
Exchange differences 1.3 1.2 2.5
Transfers between items 222.7 -222.7 0.0
At period-end 536.5 1,568.0 2,104.5
EUR million 31 Dec. 2009
Investment Operative Investment
properties under investment properties
construction (IPUC) properties total
At period-start 271.8 1,839.9 2,111.6
Acquisitions 0.0 - 0.0
Investments 84.4 33.4 117.8
Disposals - -2.7 -2.7
Capitalized interest 6.3 1.6 7.9
Fair value gains on investment - 5.5 5.5
property
Fair value losses on investment -14.9 -88.0 -102.9
property
Exchange differences 10.6 17.3 27.9
Transfers between items -88.3 70.6 -17.7
At period-end 269.8 1,877.6 2,147.4
An external professional appraiser has conducted the valuation of the company's
investment properties with a net rental income based cash flow analysis. Market
rents, occupancy rate, operating expenses and yield requirement form the key
variables used in the cash flow analysis. The segments' yield requirements and
market rents used by the external appraiser in the cash flow analysis were as
follows:
Weighted average yield Weighted average
requirement (%) market rents (€/m²)
30 June 30 June 31 Dec. 30 June 30 June 31 Dec.
2010 2009 2009 2010 2009 2009
Finland 6.5 6.5 6.6 23.4 22.2 22.5
Sweden 6.2 6.5 6.4 22.7 18.9 21.3
Baltic Countries 8.2 7.7 8.1 21.2 20.5 21.4
Average 6.6 6.6 6.6 23.0 21.3 22.1
8. Investment Properties Held for Sale
In 2009, the Investment properties held for sale comprised buildings rights
acquired for the Myllypuro development project and 181 residential units in
Åkersberga Centrum. Buildings rights acquired for the Myllypuro development
project were sold to three different residential investors through share
transactions on 12 January 2010. A gain on sale of EUR 2.3 million was recorded
from this transaction. On 30 June 2010, investment properties held for sale
include 181 residential units in Åkersberga Centrum, which were sold to
Tegeltornet AB in July 2010.
EUR million 30 June 2010 30 June 2009 31 Dec. 2009
At period-start 26.0 - -
Investments 0.1 - 8.3
Disposals -8.4 - -
Exchange differences 1.3 - -
Transfers from investment properties 0.0 - 17.7
At period-end 19.0 - 26.0
9. Cash and Cash Equivalents
EUR million 30 June 2010 30 June 2009 31 Dec. 2009
Cash in hand and at bank 16.7 16.7 13.5
Short-term deposits 8.3 - 6.4
Total 25.0 16.7 19.8
10. Derivative Financial Instruments
EUR million 30 June 2010 30 June 2009 31 Dec. 2009
Nominal Fair Nominal Fair Nominal Fair
amount value amount value amount value
Interest rate derivatives
Interest rate swaps
Maturity:
less than 1 year 92.5 -0.3 66.0 -1.0 48.8 -1.2
1-2 years 70.0 -3.1 86.2 2.6 70.0 1.0
2-3 years 133.0 -10.2 70.0 -3.5 60.0 -3.0
3-4 years 155.4 -10.3 133.0 -7.5 262.9 -14.5
4-5 years 254.0 -13.4 146.2 -7.4 198.0 -7.3
over 5 years 172.5 -8.5 172.1 -9.5 97.9 -4.0
Subtotal 877.3 -45.7 673.5 -26.3 737.6 -29.0
Foreign exchange derivatives
Forward agreements
Maturity:
less than 1 year 0.0 0.0 4.8 0.1 22.0 -0.2
Total 877.3 -45.7 678.3 -26.2 759.7 -29.2
The fair value of derivative financial instruments represents the market value
of the instrument with prices prevailing at the end of the period. Derivative
financial instruments are used in hedging the interest rate risk of the interest
bearing liabilities and foreign currency risk.
The fair values include foreign exchange rate gain of EUR 1.0 million (EUR 5.7
million) which is recognized in the statement of comprehensive income under net
financial income and expenses.
Hedge accounting is applied for interest rates swaps which have nominal amount
of EUR 851.0 million (EUR 650.4 million). The fair value loss recognized under
other comprehensive income taking into account the tax effect totals EUR -9.9
million (EUR -4.4 million).
11. Dividends and Return from the Invested Unrestricted Equity Fund
In accordance with the proposal by the Board of Directors and the decision by
the Annual General Meeting held on 11 March 2010, dividend for the financial
year 2009 amounted to EUR 0.04 per share (EUR 0.04 for the financial year 2008)
and EUR 0.10 per share was decided to be returned from the invested unrestricted
equity fund (EUR 0.10 for the financial year 2008).
Dividend and equity return of EUR 30.9 million for the financial year 2009 (EUR
30.9 million for the financial year 2008) were paid on 7 April 2010.
12. Interest-bearing Liabilities
During the period, repayments of interest-bearing debt amounted to EUR 86.4
million were made in line with previously disclosed repayment terms.
Other proceeds and repayments from/of long-term loans in the cash-flow statement
arose from the use of revolving credit facilities and new term loans.
13. Contingent Liabilities
EUR million 30 June 2010 30 June 2009 31 Dec. 2009
Mortgages on land and buildings 45.8 40.8 42.9
Bank guarantees 44.4 49.7 45.4
Capital commitments 39.1 11.6 44.0
On 30 June 2010, Citycon had capital commitments of EUR 39.1 million (EUR 11.6
million) relating mainly to development and redevelopment projects.
14. Related Party Transactions
There were no significant transactions with the related parties during the
period.
15. Key Figures
Q1-Q2/ Q1-Q2/ Change- 2009
2010 2009 %
Earnings per share (basic), EUR 0.19 -0.11 - -0.16
Earnings per share (diluted), EUR 0.18 -0.11 - -0.16
Equity per share, EUR 3.30 3.35 -1.5% 3.31
Net asset value (EPRA NAV) per share, EUR 3.54 3.58 -1.2% 3.54
Equity ratio, % 33.8 36.2 - 34.2
The formulas for key figures can be found from the 2009 annual financial
statements.
The figures are unaudited.
Financial Reports in 2010
Citycon will issue one more interim report during the financial year 2010. The
interim report 1-9/2010 will be published on Wednesday 13 October 2010, at
approximately 9:00 a.m.
For more investor information, please visit the corporate website at
www.citycon.com.
For further information, please contact:
Petri Olkinuora, CEO
Tel +358 20 766 4401 or +358 400 333 256
petri.olkinuora@citycon.fi
Eero Sihvonen, Executive Vice President and CFO
Tel +358 20 766 4459 or +358 50 557 9137
eero.sihvonen@citycon.fi
Distribution:
NASDAQ OMX Helsinki
Major media
www.citycon.com
REPORT ON REVIEW OF CITYCON OYJ'S INTERIM FINANCIAL INFORMATION FOR THE PERIOD
JANUARY 1 - JUNE 30, 2010
To the Board of Directors of Citycon Oyj
Introduction
We have reviewed the accompanying statement on the financial position of Citycon
Oyj as of June 30, 2010 and the related statements of comprehensive income,
changes in equity and cash flows for the six-month period then ended, and
explanatory notes, prepared in accordance with International Financial Reporting
Standards as adopted by the EU. The Board of Directors and the Managing Director
are responsible for the preparation and fair presentation of this interim
financial information in accordance with the Securities Market Act, chapter 2,
paragraph 5 a. Based on our interim review, at the request of the Board of
Directors we submit our statement in accordance with chapter 2, paragraph 5 a,
sub-paragraph 7 of the Securities Market Act.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements 2410, "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity." A review of interim financial information
consists of making inquiries, primarily with persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially narrower in scope than an audit conducted in accordance
with the Standards on Auditing. For this reason, a review does not provide
assurance that all significant matters would come to light that might be
identified in an audit. Accordingly, we do not express an audit opinion.
Opinion
Based on our review, nothing has come to our attention that gives us cause to
believe that the accompanying interim financial information, prepared in
accordance with International Financial Reporting Standards as adopted by the
EU, does not give a true and fair view of the financial position of the entity
as at June 30, 2010, and of its financial performance and its cash flows for the
six-month period then ended, in accordance with the Securities Market Act.
Helsinki, July 13, 2010
Ernst & Young Oy
Authorized Public Accountants
Tuija Korpelainen, Authorized Public Accountant
[HUG#1431361]