Summary of the Third Quarter of 2010 Compared with the Previous Quarter
- Turnover amounted to EUR 48.0 million (Q2/2010: EUR 48.6 million).
- Net rental income increased by 3.6 per cent to EUR 33.0 million (EUR 31.8
million). This increase was due mainly to lower property operating expenses
reflecting common seasonal variations.
- Earnings per share were EUR 0.10 (EUR 0.13).
- Direct result per share (diluted) was EUR 0.06 (EUR 0.05).
- The fair value change of investment properties was EUR 15.8 million (EUR 22.9
million), and the fair value of investment properties totalled EUR 2,299.9
million (EUR 2,229.5 million).
- The average net yield requirement for investment properties decreased to 6.5
per cent (6.6%) at the end of the period, according to an external appraiser.
- Net financial expenses decreased to EUR 14.0 million (EUR 14.4 million).
- On the basis of Citycon's loan agreement covenants, its interest cover ratio
was 2.1 (2.2) and equity ratio 38.9 per cent (37.1%).
- In September, the company issued 22 million new shares in a share issue
directed to Finnish and international institutional investors, raising
approximately EUR 63 million in new equity.
- Citycon repurchased its 2006 convertible bonds for EUR 1.4 million.
- During the period, the company finalised the sale of apartments located in
Åkersberga Centrum in greater Stockholm area, Sweden. The selling price amounted
to SEK 181 million (approx. EUR 19 million).
- On 22 September, Citycon organised its Capital Markets Day in Tallinn.
Summary of January-September 2010 Compared with the Corresponding Period of 2009
- Turnover grew by 6.3 per cent to EUR 146.1 million (Q1-3/2009: EUR 137.4
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 80.8 million (EUR -13.1 million), including a
EUR 39.5 million (EUR -58.7 million) change in the fair value of investment
properties.
- Net rental income increased by 1.7 per cent to EUR 95.4 million (EUR 93.8
million). The growth in net rental income was slowed down by higher property
operating expenses due to severe winter conditions. If the impact of the
strengthened Swedish krona is excluded, net rental income decreased by 0.3 per
cent.
- Net rental income from like-for-like properties decreased by 0.8 per cent
excluding the impact of strengthened Swedish krona, due mainly to higher
property operating expenses than in the corresponding period. These higher
operating expenses were primarily caused 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 33.8 million (EUR 38.4 million).
- Direct result per share (diluted) was EUR 0.15 (EUR 0.17).
- Earnings per share were EUR 0.29 (EUR -0.05). Changes in the fair value of
investment properties have a substantial impact on earnings per share.
- The occupancy rate was 94.5 per cent (94.7%). 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 0.09 (EUR 0.24)
due to extraordinary items and timing differences.
- The equity ratio was unchanged at 35.9 per cent (35.9%).
- The company's financial position improved due to the share issue during the
period. Total liquidity at the end of the reporting period was
EUR 263.6 million, including unutilised committed debt facilities amounting to
EUR 177.1 million and EUR 86.5 million in cash.
Key Figures
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 %(1)) 2009
Turnover, EUR million 48.0 45.9 48.6 146.1 137.4 6.3% 186.3
Net rental income, EUR
million 33.0 32.5 31.8 95.4 93.8 1.7% 125.4
Operating profit, EUR
million 42.8 27.4 49.2 122.3 22.7 - 10.3
% of turnover 89.2% 59.6% 101.3% 83.8% 16.5% - 5.5%
Profit/loss before taxes,
EUR million 28.8 15.6 34.8 80.8 -13.1 - -37.5
Profit/ loss attributable to
parent company shareholders,
EUR million 22.5 13.3 28.4 63.9 -10.5 - -34.3
Direct operating profit, EUR
million 28.0 28.6 26.3 80.7 81.4 -0.8% 107.7
% of turnover 58.4% 62.2% 54.2% 55.3% 59.2% -6.7% 57.8%
Direct result, EUR million 12.3 14.2 10.1 33.8 38.4 -12.0% 50.9
Indirect result, EUR million 10.2 -0.9 18.3 30.1 -48.9 - -85.2
Earnings per share (basic),
EUR 0.10 0.06 0.13 0.29 -0.05 - -0.16
Earnings per share
(diluted), EUR 0.10 0.06 0.12 0.28 -0.05 - -0.16
Direct result per share
(diluted), (diluted EPRA
EPS), EUR 0.06 0.06 0.05 0.15 0.17 -11.5% 0.23
Net cash from operating
activities per share, EUR 0.04 0.05 0.01 0.09 0.24 -63.5% 0.30
Fair value of investment
properties, EUR million 2,229.5 2,299.9 2,162.7 6.3% 2,147.4
Equity per share, EUR 3.30 3.36 3.41 -1.5% 3.31
Net asset value (EPRA NAV)
per share, EUR 3.54 3.58 3.64 -1.5% 3.54
EPRA NNNAV per share, EUR 3.35 3.37 3.46 -2.5% 3.35
Equity ratio, % 33.8 35.9 35.9 0.1% 34.2
Gearing, % 174.6 153.4 159.5 -3.8% 169.5
Net interest-bearing debt
(fair value), EUR million 1,369.6 1,343.1 1,272.3 5.6% 1,312.2
Net rental yield, % 6.0 5.9 6.1 - 6.1
Net rental yield, like-for-
like properties, % 6.6 6.5 6.5 - 6.6
Occupancy rate, % 94.6 94.5 94.7 -0.2% 95.0
Personnel (at the end of the
period) 124 123 117 5.1% 119
1) Change-% is calculated from exact figures and refers to the change between
2010 and 2009.
CEO Petri Olkinuora's Comments on the reporting period:
"The company's seven ongoing major (re)development projects progressed during
the period. These projects will further enhance the competitiveness and
attractiveness of Citycon's shopping centres. The (re)development projects will,
however, temporarily reduce the leasable area by approximately 35,000 square
metres.
Citycon is in the process of divesting all of its apartments in Sweden, as these
are not part of the company's core business. The sale of apartments in
Åkersberga Centrum took place during the period and, previously this year, the
company sold its apartments in Liljeholmstorget and part of those in Jakobsbergs
Centrum. The aggregate value of these disposals totalled EUR 48.6 million.
Following the realised transactions, the value of the company's remaining
apartment portfolio in Sweden is approximately EUR 40 million.
The financial position of the company is stable. The directed share issue
arranged by the company in September was completed successfully. At the period
end, available liquidity totalled EUR 263.6 million."
Business Environment
During the period, retail sales continued to grow both in Finland and Sweden.
During the first eight months of the year, retail sales increased by 3.7 per
cent in Finland and by 2.6 per cent in Sweden. In August, Finnish retail sales
increased by 5.5 per cent and Swedish retail sales by 4.4 per cent compared with
August 2009. Consumer confidence in household economies improved in both
countries. Furthermore, unemployment has started to decline; unemployment rate
in August was 7.3 per cent in Finland and 7.4 per cent in Sweden. In Estonia,
the decline of the retail sales has decelerated. In August, Estonian retail
sales declined by one per cent whereas during the first eight months of the year
they declined by 7.0 per cent. Also in Estonia, consumer confidence has improved
despite the 18.6 per cent unemployment rate. (Sources: Statistics Finland,
Statistics Sweden, Statistics Estonia)
In Finland and Sweden, consumer prices continued to rise during the third
quarter. In August, inflation in Finland was 1.2 per cent, in Sweden 0.9 per
cent, and in Estonia 2.2 per cent. The interest rate level is still very low,
but rising slightly (sources: ibid).
Availability of financing improved markedly during 2010, compared with the
previous year. Activity on the property market has clearly increased but, so
far, the number of actual transactions remains low. Shopping centre occupancy
rates remain high. (Source: Catella)
Business and Property Portfolio Summary
Citycon focuses on the shopping centre business in the Nordic 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 strives to enhance the
commercial appeal of its properties, taking into account the specific
characteristics of each property's catchment area such as purchasing power,
competition and consumer demand. The ultimate goal is to create rental premises
generating added value to tenants and customers.
At the end of September 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 2,299.9 million (EUR 2,162.7
million) with Finnish properties accounting for 65.1 per cent (67.0%), Swedish
properties for 27.8 per cent (25.5%) and Baltic properties for 7.1 per cent
(7.5%). The gross leasable area at the end of the period totalled 931,480 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
valuates 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 for the
end of September 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 6.5 per cent on 30 September 2010. The average
net yield requirement for Citycon's properties in Finland, Sweden and the Baltic
countries stood at 6.5 per cent, 6.1 per cent and 8.2 per cent, respectively.
As required by IAS 40, Citycon recognises its investment property at fair value.
The combined market value of its properties on the closing date of the interim
accounts is reported in the statement of financial position, while any changes
in the 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 73.4 million and a total value decrease of EUR 34.0 million. The
net effect of these changes on the company's profit was EUR 39.5 million (EUR
-58.7 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. Exceptions to this policy
concern mainly the renting of apartments, storage areas and individual parking
spaces.
At the end of the reporting period, Citycon had a total of 3,793 (4,033) leases.
The number of leases decreased due mainly to the disposal of apartments in
Sweden resulting in lower number of leases. The average remaining length of the
lease agreements was 3.2 (3.0) years. The net rental yield of Citycon's property
portfolio was 5.9 per cent (6.1%) and the economic occupancy rate was 94.5 per
cent (94.7 %). The decrease in the occupancy rate was due to new (re)development
projects started or planned during the period and a slight increase in the
property portfolio vacancy rate.
Citycon's net rental income increased by 1.7 per cent to EUR 95.4 million. The
leasable area decreased by 1.4 per cent to 931,480 square metres. Net rental
income from like-for-like properties decreased by 0.8 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. 76.9 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
Baltic
EUR million Finland Sweden Countries Other Total
Q1-3/2008 68.2 18.8 4.6 0.0 91.6
Acquisitions - - - - 0,0
(Re)development projects 1.2 0.1 2.9 - 4.3
Divestments -0.2 0.0 0.0 - -0.2
Like-for-like 0.2 0.5 -0.3 - 0.4
Other (incl. exch. rate diff.) -0.1 -2.2 0.1 0.0 -2.3
Q1-3/2009 69.4 17.1 7.3 0.0 93.8
Acquisitions - - - - 0,0
(Re)development projects -4.0 3.2 1.6 - 0.8
Divestments -0.2 -0.3 - - -0.5
Like-for-like -0.5 0.2 -0.2 - -0.6
Other (incl. exch. rate diff.) 0.1 1.9 0.0 0.0 1.9
Q1-3/2010 64.7 22.1 8.7 0.0 95.4
During the last 12 months, the rolling twelve-month occupancy cost ratio for
like-for-like shopping centre properties was 8.5 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
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of leases started
during the period 184 140 175 544 487 11.7 873
Total area of leases
started, sq.m. (1)) 33,341 23,789 36,256 112,594 72,366 55.6 141,628
Average rent of leases
started (EUR/sq.m.) (1)) 17.5 20.7 17.2 17.7 20.9 -15.3 23.6
Number of leases ended
during the period 408 187 185 985 597 65.0 781
Total area of leases ended,
sq.m. (1)) 42,107 40,798 54,801 165,375 99,516 66.2 127,730
Average rent of leases ended
(EUR/sq.m.) (1)) 14.2 17.2 14.2 15.7 17.1 -8.2 17.5
Average rent (EUR/sq.m.) 18.7 17.3 18.2 18.7 17.3 17.6
Occupancy rate at end of the
period, % 94.6 94.5 94.7 -0.2 95.0
Average remaining length of
lease portfolio at the end
of the period, year 3.3 3.2 3.0 6.7 3.1
(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 have been sold during 2010, as these are not part
of the company's core business.
In early January, Citycon divested the building rights for the apartments 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 1.2 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. 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.
The sale of apartments located in Åkersberga Centrum in Österåker, Sweden, took
place in July. The sale price amounted to SEK 181 million (approx. EUR 19
million). The company recognised a loss on sale of EUR 0.8 million for the
transaction.
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
affecting 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 project's first phase will be completed
in October 2010. 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. 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. 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.
Citycon has a similar project underway in the Martinlaakso district in Vantaa,
where the company is building a new shopping centre to replace the old retail
centre. The project was initiated with the demolition work of the old retail
centre 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 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 renovation
and refurbishment in order to meet current customer needs. Citycon will invest
EUR 20.5 million in this project. The first refurbished premises were opened to
customers at the end of May. The estimated total investment of the
refurbishment, EUR 18 million, has been exceeded by EUR 2.5 million due mainly
to works conducted outside of the investment area, partly as a requirement of
the authorities. These works should have been done in any case, since they are
necessitated by the planned extension of the shopping centre. The original
investment decision also includes costs related to the planned extension of
Espoontori to adjacent Asemakuja property, such as zoning and land use payments,
totaling approximately EUR 5.3 million.
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 first phase of Forum's refurbishment was completed in September,
and the entire project will be completed 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 area of 8,000
square metres will be redeveloped in the Hansa property and the project is due
for completion in spring 2011. In addition, 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.
At the Myyrmanni shopping centre in Vantaa, Finland, major tenant alteration
works are underway. 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 phases. Citycon is also refurbishing a retail
property in the centre of Kirkkonummi, west of Helsinki. The refurbishment of
Torikeskus in Seinäjoki has been brought to a halt for the time being due to the
leasing situation.
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 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 44.3 million in Finland, EUR 35.5 million in Sweden and EUR 5.8
million in the Baltic countries.
(Re)development Projects Completed in 2009 and in Progress on 30 September 2010
(1))
Actual
Estimated gross capital
total investments Estimated
project by final
investment 30 Sept. 2010 year of
Location (EUR million) (EUR million) completion
Liljeholmstorget Stockholm, Sweden 154.8(2)) 154.8 completed
Rocca al Mare Tallinn, Estonia 53.8(3)) 53.8 completed
Åkersberga Centrum Österåker, Sweden 51.1(2)) 32.9 2011
Hansa (Trio) Lahti, Finland 8.0 4.0 2011(4))
Forum Jyväskylä, Finland 16.0 8.8 2010
Espoontori (incl.
Asemakuja) Espoo, Finland 25.8(5)) 15.1 2010
Myllypuro Helsinki, Finland 20.0 10.1 2012
Isolinnankatu Pori, Finland 3.0 1.5 2010
Myyrmanni Vantaa, Finland 4.8 3.3 2010
Martinlaakso Vantaa, Finland 26.3 4.7 2011
Kirkkonummen Kirkkonummi, 4.0 1.3 2010
liikekeskus Finland
(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.
(4)) The completion of the project has been postponed due to slower than
expected leasing.
(5)) The estimated total investment of the refurbishment, EUR 18 million, has
been exceeded by EUR 2.5 million. In addition, the estimated total project
investment includes costs related to the planned extension of Espoontori to
adjacent Asemakuja property, such as zoning and land use payments.
(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 planning reservation for the development of the metro station and for
the use of the related land areas 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 64.7 million (EUR 69.4 million). The
business unit accounted for 67.8 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
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of leases started
during the period 94 65 103 296 211 40.3 295
Total area of leases started,
sq.m. (1)) 22,140 20,530 27,200 80,180 38,800 106.6 57,220
Average rent of leases
started (EUR/sq.m.) (1)) 20.4 22.0 18.3 19.8 23.1 -14.3 22.5
Number of leases ended during
the period 76 108 120 376 318 18.2 408
Total area of leases ended,
sq.m. (1)) 12,170 24,450 48,460 108,890 62,240 75.0 81,480
Average rent of leases ended
(EUR/sq.m.) (1)) 22.6 22.9 15.1 18.2 20.2 -9.9 19.8
Average rent (EUR/sq.m.) 20.4 19.6 20.3 20.4 19.6 4.1 19.7
Occupancy rate at end of the
period, % 93.5 93.7 94.1 -0.4 94.6
Average remaining length of
lease portfolio at the end of
the period, year 3.2 3.1 2.9 6.9 2.8
(1) )Leases started and ended don't necessarily refer to the same premises.
Financial Performance, Finland
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of properties 65 65 66 -1.5 66
Gross leasable area, sq.m. 581,550 581,780 593,550 -2.0 587,650
Annualised potential rental
value, EUR million (1)) 134.7 135.2 135.3 -0.1 135.3
Gross rental income, EUR
million 29.7 31.3 30.1 91.2 95.0 -4.0 126.5
Turnover, EUR million 30.8 32.4 31.1 94.5 98.5 -4.1 131.3
Net rental income, EUR million 22.0 23.4 21.5 64.7 69.4 -6.7 92.4
Net fair value gains/losses on
investment property, EUR
million 10.0 -4.6 11.4 18.3 -50.6 - -65.1
Operating profit/loss, EUR
million 30.4 17.4 31.2 81.3 14.4 - 21.2
Capital expenditure, EUR
million 21.3 2.8 14.4 44.4 9.2 383.7 24.5
Fair value of investment
properties, EUR million 1,465.7 1,496.7 1,449.7 3.2 1,442.0
Net rental yield, % (2)) 6.3 6.2 6.4 6.5
Net rental yield, like-for-
like properties, % 6.6 6.5 6.5 6.6
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 eight shopping centres and seven other retail properties in Sweden,
located in the Greater Stockholm and Greater Gothenburg areas and in Umeå. The
company has strengthened its position in the Swedish shopping centre market
alongside the completion of the Liljeholmstorget shopping centre in 2009. The
company's net rental income from Swedish operations increased by 28.5 per cent
to EUR 22.1 million (EUR 17.2 million). If the impact of the strengthened
Swedish krona is excluded, net rental income from Swedish operations increased
by 15.8 per cent on the previous year. The business unit accounted for
23.1 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
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of leases started during
the period 79 71 70 231 204 13.2 449
Total area of leases started,
sq.m. (1)) 9,858 2,995 8,177 29,810 17,188 73.4 59,351
Average rent of leases started
(EUR/sq.m.) (1)) 12.0 12.9 13.9 12.4 13.0 -4.6 23.6
Number of leases ended during
the period 323 76 61 593 225 163.6 318
Total area of leases ended,
sq.m. (1)) 28,589 15,696 5,800 54,076 28,484 89.8 37,420
Average rent of leases ended
(EUR/sq.m.) (1)) 10.4 8.3 7.7 10.4 10.4 0.0 12.8
Average rent (EUR/sq.m.) 15.7 12.6 14.4 15.7 12.6 24.6 13.3
Occupancy rate at end of the
period, % 95.6 95.0 95.0 0.0 94.7
Average remaining length of
lease portfolio at the end of
the period, year 3.0 2.9 2.2 31.8 3.0
(1) )Leases started and ended don't necessarily refer to the same premises.
Financial Performance, Sweden
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of properties 15 15 15 - 15
Gross leasable area, sq.m. 294,500 278,700 280,600 -0.7 302,500
Annualised potential rental
value, EUR million 1) 52.8 52.1 40.7 28.0 48.8
Gross rental income, EUR
million 12.2 9.6 12.5 36.9 27.8 32.5 39.3
Turnover, EUR million 13.1 9.9 13.2 38.9 28.7 35.9 41.0
Net rental income, EUR million 8.1 6.4 7.6 22.1 17.2 28.5 23.2
Net fair value gains/losses on
investment property, EUR
million 5.4 -1.3 10.0 20.3 -2.6 - -19.6
Operating profit/loss, EUR
million 11.5 4.4 16.2 38.9 12.3 216.7 0.3
Capital expenditure, EUR
million 10.0 29.1 14.5 35.6 62.4 -43.0 95.9
Fair value of investment
properties, EUR million 601.0 639.9 551.0 16.1 548.8
Net rental yield, % (2)) 4.7 4.8 4.8 4.7
Net rental yield, like-for-
like properties, % 6.5 6.4 6.4 6.5
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, credit losses have increased. The Baltic vacancy rate has not, however,
increased to any substantial degree during the period under review. Net rental
income from the Baltic operations amounted to EUR 8.7 million (EUR 7.3 million).
The business unit accounted for 9.1 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
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of leases started during the
period 11 4 2 17 72 -76.4 129
Total area of leases started, sq.m.
(1)) 1,343 264 879 2,604 16,378 -84.1 25,057
Average rent of leases started
(EUR/sq.m.) (1)) 10.9 11.2 17.1 14.3 24.1 -40.7 26.0
Number of leases ended during the
period 9 3 4 16 54 -70.4 55
Total area of leases ended, sq.m.
(1)) 1,348 652 541 2,409 8,792 -72.6 8,830
Average rent of leases ended
(EUR/sq.m.) (1)) 19.5 16.5 8.8 18.9 17.0 11.2 17.1
Average rent (EUR/sq.m.) 18.2 17.9 18.1 18.2 17.9 1.7 18.6
Occupancy rate at end of the
period, % 99.5 99.8 99.7 0.1 99.4
Average remaining length of lease
portfolio at the end of the period,
year 4.8 4.8 5.4 -11.1 5.2
(1) )Leases started and ended don't necessarily refer to the same premises.
Financial Performance, Baltic Countries
Q3/ Q3/ Q2/ Q1-Q3/ Q1-Q3/ Change-
2010 2009 2010 2010 2009 % 2009
Number of properties 3 3 3 - 3
Gross leasable area, sq.m. 71,000 71,000 70,800 0.3 71,000
Annualised potential rental value,
EUR million 1) 15.4 15.5 13.2 16.7 15.8
Gross rental income, EUR million 3.4 3.4 3.4 10.4 9.7 7.0 12.0
Turnover, EUR million 4.0 3.6 4.2 12.6 10.2 23.8 14.0
Net rental income, EUR million 2.9 2.7 2.8 8.7 7.3 19.3 9.8
Net fair value gains/losses on
investment property, EUR million 0.4 4.7 1.5 0.9 -5.6 - -12.7
Operating profit/loss, EUR million 3.0 7.2 4.1 8.8 1.1 - -3.8
Capital expenditure, EUR million 0.1 1.2 -1.8 5.8 12.2 -52.4 13.9
Fair value of investment
properties, EUR million 162.8 163.3 162.0 0.8 156.6
Net rental yield, % (2)) 7.1 7.1 6.7 6.4
Net rental yield, like-for-like
properties, % 8.4 8.4 8.1 8.2
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
Citycon Group's turnover for the period came to EUR 146.1 million
(EUR 137.4 million), principally derived from the rental income generated by
Citycon's retail premises. Gross rental income accounted for 94.8 per cent
(96.5%) of turnover.
Operating profit came to EUR 122.3 million (EUR 22.7 million). Profit before
taxes was EUR 80.8 million (EUR -13.1 million) and profit after taxes
attributable to the parent company's shareholders was EUR 63.9 million (EUR
-10.5 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 were EUR 0.9 million
(EUR 0.3 million). Temporary rental rebates totalled EUR 2.4 million (EUR 1.0
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 30.1 million (EUR -48.9 million), tax effects included.
Taking this into account, the direct result after taxes was EUR 4.6 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, the gain from the buybacks of convertible bonds recognised in
2009 and lower capitalisation of interest expenses than during the reference
period.
Earnings per share were EUR 0.29 (EUR -0.05). Direct result per share, diluted,
(diluted EPRA EPS) came to EUR 0.15 (EUR 0.17). Net cash flow from operating
activities per share was EUR 0.09 (EUR 0.24).
Human Resources and Administrative Expenses
At the end of the period, Citycon Group employed a total of 123 (117) persons,
of whom 80 were employed in Finland, 35 in Sweden and eight in the Baltic
countries. Administrative expenses increased to EUR 15.5 million
(EUR 12.4 million), including EUR 0.5 million (EUR 0.2 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 86.6 million (EUR 84.1 million). Of this, agreed purchase price adjustments
related to property acquisitions concluded earlier accounted for EUR 2.6 million
(EUR 0.0 million), property development for EUR 82.9 million (EUR 83.7 million)
and other investments for EUR 1.0 million (EUR 0.5 million). These 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 approximately EUR 67.1 million and recorded a total of EUR
2.2 million in gains and losses on sales, including tax effects. These
divestments have been covered in more detail above, under "Acquisitions and
Divestments".
Statement of Financial Position and Financing
Total assets at the end of the period stood at EUR 2,424.8 million
(EUR 2,207.4 million). Liabilities totalled EUR 1,554.6 million
(EUR 1,416.1 million), with short-term liabilities accounting for
EUR 260.6 million (EUR 155.6 million). Citycon's financial position improved due
to the directed share issue and the signing of three new loan agreements. At the
end of the period under review, Citycon's liquidity was EUR 263.6 million, of
which EUR 177.1 million consisted of undrawn, committed credit facilities and
EUR 86.5 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 226.7 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 36.8 million.
Citycon's financing is mainly arranged on a long-term basis, with short-term
interest-bearing debt constituting approximately 16 per cent of the company's
total interest-bearing debt at the end of the period.
Year-on-year, reported interest-bearing debt increased by 140.0 million to
EUR 1,421.3 million (EUR 1,281.3 million). The fair value of the interest-
bearing debt stood at EUR 1,429.6 million (EUR 1,291.6 million).
Cash and cash equivalents totalled EUR 86.5 million (EUR 19.4 million). The fair
value of the interest-bearing net debt stood at EUR 1,343.1 million
(EUR 1,272.3 million).
The year-to-date weighted average interest rate decreased compared to the
previous year and was 4.01 per cent (4.24%). The average loan maturity, weighted
according to the principal amount of the loans, stood at 3.2 years (3.9 years).
The average interest-rate fixing period was 3.0 years (3.2 years).
Citycon's interest cover ratio declined to 2.1 (Q2/2010: 2.2). The company's
equity ratio as defined in the loan agreement covenants increased due to the
share issue and was 38.9 per cent (Q2/2010: 37.1%).
The weighted average interest rate, interest-rate swaps included, was 3.93
per cent on 30 September 2010.
At the end of the reporting period, Citycon's equity ratio was 35.9 per cent
(35.9%). Gearing stood at 153.4 per cent (159.5%).
At the end of the reporting period, Citycon's interest-bearing debt included
82.1 per cent (77.5%) of floating-rate loans, of which 76.1 per cent (71.4%) had
been converted to fixed-rate ones by means of interest-rate swaps. Fixed-rate
debt accounted for 80.4 per cent (77.8%) 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 third quarter in 2010 the
hedging ratio declined due to increased amount of debt.
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 892.9 million (EUR 774.8 million), with hedge accounting applied to
interest-rate swaps whose nominal amount totalled EUR 865.5 million
(EUR 750.4 million).
On 30 September 2010, the nominal amount of all of the company's derivative
contracts totalled EUR 892.9 million (EUR 777.9 million) and their fair value
was EUR -44.5 million (EUR -30.2 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 -7.8
million (EUR -5.8 million).
Net financial expenses totalled EUR 41.6 million (EUR 35.8 million). This
increase was mainly attributable to increased interest expenses as a result of
lower capitalisation of interest expenses and a higher amount of interest-
bearing debt. In addition, the net financial expenses in the statement of
comprehensive income include EUR 1.1 million (EUR 1.1 million) in non-cash
expenses related to the option component on convertible bonds.
Directed Share Issue
Citycon strengthened its financial position by arranging a directed share issue
in September. The issue was based upon the authorisation granted by Citycon's
Annual General Meeting of 13 March 2007. Waiving the shareholders' pre-emptive
subscription rights, the share issue was directed to Finnish and international
institutional investors and was carried out in an accelerated book-building
process on 21 September 2010. A total of 22 million new shares were offered for
subscription at a per-share price of EUR 2.87.
Based on the bids submitted during the book-building process, on
21 September 2010 the company's Board of Directors decided to issue a total of
22 million new shares. The aggregate share subscription price was recorded in
the invested unrestricted equity fund. The new shares were registered in the
Trade Register on 24 September 2010 and trading in them began on the same day in
the NASDAQ OMX Helsinki Ltd. The new shares entitle their holders to a dividend
for the financial year beginning on 1 January 2010. Following the issue, the
number of the company's shares rose to 244,564,972. The new shares offered
accounted for approximately 9.9 per cent of the number of Citycon's shares prior
to the share issue and for 9.0 per cent after the issue.
Total proceeds from the share issue before commissions and expenses totalled EUR
63.1 million. The company intends to use the proceeds for repayments of its
interest-bearing debt, for strengthening its capital structure and financing
(re)development projects and potential acquisitions in line with its investment
strategy.
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 4.8
million (including accrued interest). The repurchased principal amount of EUR
5.25 million corresponds to a total of 105 bonds with a face value of EUR
50,000, representing some 5 per cent of the aggregate amount of the convertible
bonds maturing in 2013. These repurchased bonds have been cancelled. Following
the cancellations, the number of shares available for subscription under the
convertible bonds decreased to 16,964,285 and the maximum increase allowed in
Citycon's share capital decreased to EUR 22,901,784.75.
Including the buybacks in 2008 and 2009, Citycon has repurchased a total
principal amount of EUR 38.75 million of the convertible bonds, corresponding to
approximately 35 per cent of the aggregate amount of the convertible bonds. The
weighted average repurchase price was 58.1 per cent of the face value of the
bonds. The face value of the convertible bonds, originally EUR 110 million,
totalled EUR 71.25 million at the end of the period.
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 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 in 2009 the real economic
growth was negative in Finland, Sweden and the Baltic countries. It has been
predicted that in 2010 the real growth of economies will be positive in Finland,
Sweden and Estonia but in Lithuania the economy is expected to contract further
(source: Eurostat). In addition, in Finland, Sweden, Estonia and Lithuania
unemployment is expected to remain at above normal levels while inflation
remains low (source: Nordea). However, lately the uncertainty regarding the
coming direction of economic growth has increased, following the sovereign debt
problems of European states and the United States' deteriorated financial
figures and it is possible the economic growth again deteriorates and global
economies fall into a new recession. Such an economic development might reduce
demand for retail premises, weaken the lessees' ability to pay the rent, limit
opportunities for increasing rents, and increase the vacancy rates of the
properties.
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. Should this development continue, it will increase
the price of new debt financing and the company's average interest rate level in
the future. Citycon's financial position is good. At the end of the period, the
company's available liquidity totalled EUR 263.6 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 the
general and local economic development, the level of interest rates, expected
inflation, the development of the market rent level, vacancy and property
investors' yield requirements as well as competition. The development of the
fair value of the investment properties is currently subject to greater
uncertainty than usually due to the challenging economic situation and increased
unemployment in all of the company's business areas. In recent years, retail
property values have declined and the company has recognised fair value losses
on its investment properties during the financial years 2008 and 2009, however,
in 2010, the company has recognised fair value gains. 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 and has 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. In 2010, the construction
costs decreased from top level which enabled the launch of new projects but the
challenge is to achieve a sufficient rate of pre-leasing with sufficient rental
levels necessary to commence the project.
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, almost all
shopping centres showed improvement with respect to the various elements of
sustainable development from the previous year. The average Green Index
illustrating the 2010 evaluation results rose in all Citycon properties by 28%
from last 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
properties' 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 stock exchange release published on
11 March 2010 and 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. Chaim Katzman was elected Chairman
of the company's Board of Directors at the Board meeting held on 15 June 2010.
Other decisions made by the Extraordinary General Meeting have been reported in
the stock exchange release published on 17 May 2010 and the interim report
published on 14 July 2010.
Shareholders, Share Capital and Shares
Trading and Share Performance
During January-September, the number of Citycon shares traded on the NASDAQ OMX
Helsinki totalled 85.7 million (126.1 million) at an overall value of
EUR 235.8 million (EUR 227.4 million). The highest quotation during the period
was EUR 3.15 (EUR 2.97), and the lowest EUR 2.29 (EUR 1.30). The reported trade-
weighted average price was EUR 2.75 (EUR 1.81), and the share closed at EUR 3.13
(EUR 2.90). At the end of the period, the company's market capitalisation
totalled EUR 765.5 million (EUR 641.1 million).
Shareholders
Citycon had a total of 4,793 (3,692) registered shareholders at the end of
September, of which ten were account managers of nominee-registered shares.
Nominee-registered and other international shareholders held 210.5 million
(200.7 million) shares, or 86.1 per cent (90.8%) of the company's share capital
and voting rights.
Notifications of Changes in Shareholdings
According to a notice received by Citycon Oyj on 31 August 2010, ING Clarion
Real Estate Securities, LLC's (f/k/a ING Clarion Real Estate Securities, L.P.)
("ING CRES") holding in the company had fallen below the threshold of 5 per cent
on 18 August 2008. As additional information to the notice ING CRES announced
that "this notice is provided to remedy a missed filing that should have been
made in August 2008. As of 30 August 2010, ING CRES holds 1,344,574 (0.60%)
shares of Citycon and has voting authority over 1,235,780 (0.56%) shares. ING
CRES holds such shares and voting authority in its capacity as investment
manager for various institutional investors."
Share Capital and Shares
At the end of September 2010, the company's registered share capital totalled
EUR 259,570,510.20 and the number of shares was 244,564,972. 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
addition, the company arranged a directed share issue involving the issue of
22,000,000 new shares. This share issue is discussed in more detail above. In
total, the number of the company's shares increased by 23,505,237 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, following the share issue arranged in September, still decide on
a maximum of 50,033,412 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.
Stock Options 2004
The Annual General Meeting held on 15 March 2004 authorised the issue of a
maximum of 3,900,000 A/B/C stock options to the personnel of Citycon Group. The
stock options C 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 September 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 Sept. 2008
Subscription period ends 31 March 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.
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. This 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.
Helsinki, 12 October 2010
Citycon Oyj
Board of Directors
Interim Condensed Consolidated Financial Statements
1 January - 30 September 2010
Condensed Consolidated Statement of Comprehensive Income, IFRS
Q3/ Q3/ Change- Q1-Q3/ Q1-Q3/ Change-
EUR million 2010 2009 % 2010 2009 % 2009
Gross rental income 45.3 44.4 2.1% 138.5 132.6 4.4% 177.8
Service charge income 2.6 1.5 72.9% 7.6 4.8 58.7% 8.5
Turnover (Note 3) 48.0 45.9 4.5% 146.1 137.4 6.3% 186.3
Property operating expenses
(Note 4) 14.6 13.4 9.1% 49.5 43.2 14.7% 60.2
Other expenses from leasing
operations 0.3 0.0 - 1.1 0.4 - 0.7
Net rental income 33.0 32.5 1.5% 95.4 93.8 1.7% 125.4
Administrative expenses 5.2 3.9 33.9% 15.5 12.4 24.8% 17.8
Other operating income and
expenses 0.1 0.0 - 0.1 0.0 - 0.0
Net fair value gains/losses on
investment property 15.8 -1.2 - 39.5 -58.7 - -97.4
Net losses/gains on sale of
investment property -0.8 - - 2.8 0.1 - 0.1
Operating profit 42.8 27.4 56.4% 122.3 22.7 - 10.3
Net financial income and
expenses -14.0 -11.7 19.2% -41.6 -35.8 16.2% -47.7
Profit/loss before taxes 28.8 15.6 84.2% 80.8 -13.1 - -37.5
Current taxes -1.5 -2.0 -23.1% -5.9 -5.3 11.7% -6.5
Change in deferred taxes -1.7 -0.3 - -2.3 5.8 - 7.0
Profit/loss for the period
25.5 13.3 91.3% 72.6 -12.6 -
-36.9
Profit/loss attributable to
Parent company shareholders 22.5 13.3 69.6% 63.9 -10.5 - -34.3
Minority interest 3.0 0.1 - 8.7 -2.1 - -2.6
Earnings per share attributable
to parent company shareholders
Earnings per share (basic),
EUR (Note 6) 0.10 0.06 67.2% 0.29 -0.05 - -0.16
Earnings per share (diluted),
EUR (Note 6) 0.10 0.06 62.8% 0.28 -0.05 - -0.16
Direct result (Note 5) 12.3 14.2 -13.5% 33.8 38.4 -12.0% 50.9
Indirect result (Note 5) 10.2 -0.9 - 30.1 -48.9 - -85.2
Profit/ loss for the period
attributable to parent company
shareholders 22.5 13.3 69.6% 63.9 -10.5 - -34.3
Other comprehensive
income/expenses
Net profit/losses on cash flow
hedges 2.9 -1.8 - -10.6 -7.8 35.5% -6.7
Income taxes relating to cash
flow hedges -0.8 0.5 - 2.7 2.0 35.5% 1.8
Exchange losses/gains on
translating foreign operations -1.0 1.9 - 2.3 2.1 - 2.0
Other comprehensive
income/expenses for the period,
net of tax 1.2 0.6 109.1% -5.5 -3.7 48.6% -3.0
Total comprehensive profit/loss
for the period 26.7 13.9 92.0% 67.2 -16.3 - -39.9
Total comprehensive profit/loss
attributable to
Parent company shareholders 23.1 12.7 82.9% 57.9 -15.4 - -38.4
Minority interest 3.5 1.2 184.2% 9.3 -0.9 - -1.4
Condensed Consolidated Statement of Financial Position, IFRS
EUR million Note 30 Sept. 2010 30 Sept. 2009 31 Dec. 2009
Assets
Non-current assets
Investment properties 7 2,299.9 2,162.7 2,147.4
Intangible assets and property,
plant and equipment 2.1 1.7 1.6
Deferred tax assets 11.4 8.8 8.6
Derivative financial instruments
and other non-current assets 10 0.0 0.0 3.8
Total non-current assets 2,313.5 2,173.3 2,161.4
Current assets
Investment properties held for
sale 8 - - 26.0
Derivative financial instruments 10 - 3.7 -
Trade and other receivables 24.8 11.1 46.1
Cash and cash equivalents 9 86.5 19.4 19.8
Total current assets 111.3 34.1 91.8
Total assets 2,424.8 2,207.4 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 -30.5 -23.4 -22.7
Invested unrestricted equity
fund 11 199.0 155.2 155.2
Retained earnings 11 262.8 231.6 207.8
Total equity attributable to
parent company shareholders 822.1 754.1 731.1
Minority interest 48.1 37.3 36.8
Total shareholders' equity 870.2 791.3 767.9
Long-term liabilities
Long-term interest-bearing debt 12 1,198.7 1,174.5 1,175.4
Derivative financial instruments
and other non-interest bearing
liabilities 10 42.9 34.6 32.5
Deferred tax liabilities 52.4 51.3 50.0
Total long-term liabilities 1,294.1 1,260.4 1,257.9
Short-term liabilities
Short-term interest-bearing debt 12 222.6 106.8 146.3
Derivate financial instruments 10 2.2 0.5 1.5
Trade and other payables 35.8 48.4 79.7
Total short-term liabilities 260.6 155.6 227.4
Total liabilities 1,554.6 1,416.1 1,485.3
Total liabilities and
shareholders' equity 2,424.8 2,207.4 2,253.2
Condensed Consolidated Cash Flow Statement, IFRS
Q1-Q3/ Q1-Q3/
EUR million Note 2010 2009 2009
Cash flow from operating activities
Profit/loss before taxes 80.8 -13.1 -37.5
Adjustments -0.2 94.9 145.7
Cash flow before change in working capital 80.6 81.8 108.3
Change in working capital -3.5 6.7 10.7
Cash generated from operations 77.2 88.6 119.0
Paid interest and other financial charges -42.7 -41.8 -54.4
Interest income and other financial income received 0.2 0.2 0.3
Realized exchange rate losses/gains -5.4 11.2 11.8
Taxes paid -9.7 -5.1 -10.4
Net cash from operating activities 19.5 53.1 66.2
Cash flow from investing activities
Capital expenditure on investment properties as well
as on intangible assets and PP&E 7 -96.4 -78.1 -130.9
Sale of investment properties 7, 8 66.1 3.1 3.1
Net cash used in investing activities -30.3 -75.0 -127.9
Cash flow from financing activities
Sale of treasury shares 0.2 - -
Proceeds from share issue 63.1 - -
Share subscriptions based on stock options 3.3 - -
Proceeds from short-term loans 12 101.0 103.6 149.7
Repayments of short-term loans 12 -174.4 -47.1 -77.1
Proceeds from long-term loans 12 270.5 214.1 295.1
Repayments of long-term loans 12 -156.2 -215.9 -273.0
Dividends and return from the invested unrestricted
equity fund 11 -31.0 -30.9 -30.9
Net cash from financing activities 76.6 23.7 63.8
Net change in cash and cash equivalents 65.9 1.8 2.1
Cash and cash equivalents at period-start 9 19.8 16.7 16.7
Effects of exchange rate changes 0.8 0.9 1.0
Cash and cash equivalents at period-end 9 86.5 19.4 19.8
Condensed Consolidated Statement of Changes in Shareholders' Equity, IFRS
Equity attributable to parent company shareholders
Invested
un-
Share Fair restricted Trans-
Share premium value equity lation Retained
capital fund reserve fund reserve earnings
Balance at 1 Jan. 2009 259.6 131.1 -17.7 177.3 -10.3 259.1
Total comprehensive
loss/profit for the period -5.8 0.9 -10.5
Recognized gain in the
equity arising from
convertible bond buybacks 1.1
Sale of treasury shares 0.0
Dividends and return from
the invested unrestricted
equity fund (Note 11) -22.1 -8.8
Share-based payments 0.2
Acquisition of minority
interests
Balance at 30 Sept. 2009 259.6 131.1 -23.4 155.2 -9.4 241.0
Balance at 1 Jan. 2010 259.6 131.1 -22.7 155.2 -9.5 217.3
Total comprehensive
loss/profit for the period -7.8 -0.2 63.9
Share issues 62.4
Share subscriptions based
on stock options 3.3
Recognized gain in the
equity arising from
convertible bond buybacks 0.0
Sale of treasury shares 0.2
Dividends and return from
the invested unrestricted
equity fund (Note 11) -22.1 -8.8
Share-based payments 0.2
Balance at 30 Sept. 2010 259.6 131.1 -30.5 199.0 -9.7 272.5
Equity
attributable Share-
to parent holders'
company Minority equity,
shareholders interest total
Balance at 1 Jan. 2009 799.1 38.2 837.3
Total comprehensive loss/profit for the period -15.4 -0.9 -16.3
Recognized gain in the equity arising from
convertible bond buybacks 1.1 1.1
Sale of treasury shares 0.0 0.0
Dividends and return from the invested
unrestricted equity fund (Note 11) -30.9 -30.9
Share-based payments 0.2 0.2
Balance at 30 Sept. 2009 754.1 37.3 791.3
Balance at 1 Jan. 2010 731.1 36.8 767.9
Total comprehensive loss/profit for the period 55.9 11.3 67.2
Share issues 62.4 62.4
Share subscriptions based on stock options 3.3 3.3
Recognized gain in the equity arising from
convertible bond buybacks 0.0 0.0
Sale of treasury shares 0.2 0.2
Dividends and return from the invested
unrestricted equity fund (Note 11) -30.9 -30.9
Share-based payments 0.2 0.2
Acquisition of minority interests 0,0 0,0
Balance at 30 Sept. 2010 822.1 48.1 870.2
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 12 October 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 nine-month period ended on 30 September 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.
Q3/ Q3/ Change- Q1-Q3/ Q1-Q3/ Change-
EUR million 2010 2009 % 2010 2009 % 2009
Turnover
Finland 30.8 32.4 -5.0% 94.5 98.5 -4.1% 131.3
Sweden 13.1 9.9 32.0% 38.9 28.7 35.9% 41.0
Baltic Countries 4.0 3.6 13.8% 12.6 10.2 23.8% 14.0
Total 48.0 45.9 4.5% 146.1 137.4 6.3% 186.3
Net rental income
Finland 22.0 23.4 -6.2% 64.7 69.4 -6.7% 92.4
Sweden 8.1 6.4 27.5% 22.1 17.2 28.5% 23.2
Baltic Countries 2.9 2.7 6.9% 8.7 7.3 19.3% 9.8
Other 0.0 0.0 - 0.0 0.0 - 0.0
Total 33.0 32.5 1.5% 95.4 93.8 1.7% 125.4
Direct operating profit/loss
Finland 20.5 22.0 -6.9% 60.8 64.9 -6.3% 86.3
Sweden 6.9 5.7 22.7% 18.6 14.9 25.1% 20.0
Baltic Countries 2.6 2.5 4.5% 8.0 6.6 19.8% 8.8
Other -2.1 -1.6 27.0% -6.7 -5.1 32.0% -7.4
Total 28.0 28.6 -2.0% 80.7 81.4 -0.8% 107.7
Operating profit/loss
Finland 30.4 17.4 74.7% 81.3 14.4 464.6% 21.2
Sweden 11.5 4.4 162.8% 38.9 12.3 216.7% 0.3
Baltic Countries 3.0 7.2 -58.4% 8.8 1.1 - -3.8
Other -2.1 -1.6 27.0% -6.7 -5.1 31.6% -7.4
Total 42.8 27.4 56.4% 122.3 22.7 - 10.3
EUR million 30 Sept. 2010 30 Sept. 2009 Change-% 31 Dec. 2009
Assets
Finland 1,505.2 1,455.6 3.4% 1,455.5
Sweden 653.4 555.5 17.6% 605.7
Baltic Countries 164.2 162.9 0.8% 157.6
Other 102.0 33.4 205.5% 34.3
Total 2,424.8 2,207.4 9.9% 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
Q3/ Q3/ Change- Q1-Q3/ Q1-Q3/ Change-
EUR million 2010 2009 % 2010 2009 % 2009
Heating and electricity 4.3 4.0 6.9% 16.0 14.5 9.9% 20.2
Maintenance expenses 5.7 4.9 18.0% 18.0 14.5 24.3% 20.1
Property personnel expenses 0.1 0.1 -25.0% 0.4 0.4 3.9% 0.5
Administrative and management
fees 0.5 0.5 -5.6% 1.7 1.8 -6.7% 2.5
Marketing expenses 0.8 0.7 22.7% 3.4 2.4 42.5% 4.4
Property insurances 0.2 0.2 -6.9% 0.5 0.5 -11.1% 0.7
Property taxes 1.5 1.1 34.8% 4.4 3.5 25.5% 4.7
Repair expenses 1.5 1.8 -16.5% 5.1 5.5 -6.6% 6.9
Other property operating
expenses 0.0 0.1 -174.4% 0.0 0.0 - 0.1
Total 14.6 13.4 9.1% 49.5 43.2 14.7% 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.
Q3/ Q3/ Change- Q1-Q3/ Q1-Q3/ Change-
EUR million 2010 2009 % 2010 2009 % 2009
Direct result
Net rental income 33.0 32.5 1.5% 95.4 93.8 1.7% 125.4
Direct administrative expenses -5.0 -3.9 28.9% -14.9 -12.4 19.8% -17.7
Direct other operating income
and expenses 0.1 0.0 -303.3% 0.1 0.0 - 0.0
Direct operating profit 28.0 28.6 -2.0% 80.7 81.4 -0.8% 107.7
Direct net financial income
and expenses -14.0 -11.7 19.5% -41.1 -35.8 14.8% -47.7
Direct current taxes -1.5 -2.0 -23.1% -4.7 -5.0 -4.9% -6.2
Change in direct deferred
taxes 0.1 0.1 -12.6% 0.1 -0.1 - -0.2
Direct minority interest -0.3 -0.7 -64.3% -1.3 -2.1 -40.5% -2.8
Total direct result 12.3 14.2 -13.5% 33.8 38.4 -12.0% 50.9
Direct result per share
(diluted), (diluted EPRA EPS),
EUR( 1)) 0.06 0.06 -13.6% 0.15 0.17 -11.5% 0.23
Indirect result
Net fair value gains/losses on
investment property 15.8 -1.2 - 39.5 -58.7 - -97.4
Loss on disposal of investment
property -0.8 - - 2.8 0.1 - 0.1
Indirect administrative
expenses -0.2 - - -0.6 - - -0.1
Indirect other operating
income and expenses - - - 0.0 - - 0.0
Movement in fair value of
financial instruments 0.0 0.0 -74.6% -0.5 0.0 - -0.1
Indirect current taxes 0.0 - - -1.2 -0.3 294.9% -0.3
Change in indirect deferred
taxes -1.8 -0.4 388.0% -2.4 5.9 - 7.3
Indirect minority interest -2.7 0.7 - -7.5 4.2 - 5.3
Total indirect result 10.2 -0.9 - 30.1 -48.9 - -85.2
Indirect result per share,
diluted 0.04 0.00 - 0.13 -0.22 - -0.39
Profit/loss for the period
attributable to parent company
shareholders 22.5 13.3 69.6% 63.9 -10.5 - -34.3
¹) The calculation of the direct result per share is presented in the Note 6
"Earnings per Share".
6. Earnings per Share
Q1-Q3/ Q1-Q3/
2010 2009 2009
A) Earnings per share calculated from
the profit/loss for the period
Earnings per share, basic
Profit/loss attributable to parent
company shareholders, EUR million 63.9 -10.5 -34.3
Issue-adjusted average number of
shares, Million 222.6 221.0 221.0
Earnings per share (basic), EUR 0.29 -0.05 -0.16
Earnings per share, diluted
Profit/loss attributable to parent
company shareholders, EUR million 63.9 -10.5 -34.3
Expenses from convertible capital
loan, the tax effect deducted, EUR
million 3.1 - -
Profit/loss used in the calculation
of diluted earnings per share, EUR
million 67.0 -10.5 -34.3
Issue-adjusted average number of
shares, Million 222.6 221.0 221.0
Convertible capital loan impact,
Million 17.7 - -
Adjustment for stock options,
Million - - -
Adjustments for long-term share-
based incentive plan 0.1 - -
Issue-adjusted average number of
shares used in the calculation of
diluted earnings per share, Million 240.5 221.0 221.0
Earnings per share (diluted), EUR 0.28 -0.05 -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) 33.8 38.4 50.9
Expenses arising from convertible
capital loan, adjusted with the tax
effect deduction, EUR million 3.1 3.1 4.2
Profit used in the calculation of
direct result per share, EUR million 36.9 41.5 55.1
Issue-adjusted average number of
shares, Million 222.6 221.0 221.0
Convertible capital loan impact,
Million 17.7 18.6 18.5
Adjustment for stock options,
Million - - -
Adjustments for long-term share-
based incentive plan 0.1 0.1 0.0
Issue-adjusted average number of
shares used in the calculation of
diluted earnings per share, Million 240.5 239.6 239.5
Direct result per share (diluted),
(diluted EPRA EPS), EUR 0.15 0.17 0.23
7. Investment Property
Citycon divides its investment properties into two categories: investment
properties under construction (IPUC) and operative investment properties. At 30
September 2010 the first mentioned category included Espoontori, Jyväskylän
Forum, Kirkkonummen Liikekeskus, Lahden Hansa, Myllypuro, Martinlaakso and
Myyrmanni in Finland as well as Åkersberga Centrum in Sweden.
EUR million 30 Sept. 2010
Investment
properties
under Operative Investment
construction investment properties
(IPUC) properties total
At period-start 269.8 1,877.6 2,147.4
Acquisitions 1.9 0.7 2.6
Investments 50.5 30.0 80.5
Disposals -3.4 -35.7 -39.1
Capitalized interest 1.4 1.0 2.4
Fair value gains on investment property 12.5 60.9 73.4
Fair value losses on investment property -21.0 -13.0 -34.0
Exchange differences 4.9 61.7 66.6
Transfers between items 47.4 -47.4 0.0
At period-end 363.9 1,935.9 2,299.9
EUR million 30 Sept. 2009
Investment
properties
under Operative Investment
construction investment properties
(IPUC) properties total
At period-start 271.8 1,839.9 2,111.6
Acquisitions - - -
Investments 70.8 7.1 77.9
Disposals - -2.7 -2.7
Capitalized interest 5.5 0.3 5.8
Fair value gains on investment property 5.5 5.2 10.7
Fair value losses on investment property -3.9 -65.5 -69.5
Exchange differences 15.0 13.8 28.8
Transfers between items 226.5 -226.5 0.0
At period-end 591.1 1,571.6 2,162.7
EUR million 31 Dec. 2009
Investment
properties
under Operative Investment
construction investment properties
(IPUC) properties total
At period-start 271.8 1,839.9 2,111.6
Acquisitions 0.0 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 property - 5.5 5.5
Fair value losses on investment property -14.9 -88.0 -102.9
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 Sept. 30 Sept. 31 Dec. 30 Sept. 30 Sept. 31 Dec.
2010 2009 2009 2010 2009 2009
Finland 6.5 6.5 6.6 23.5 22.4 22.5
Sweden (1)) 6.1 6.4 6.4 23.7 20.9 21.3
Baltic Countries 8.2 7.9 8.1 21.6 21.3 21.4
Average 6.5 6.6 6.6 23.4 22.0 22.1
8. Investment Properties Held for Sale
In 2009, the Investment properties held for sale comprised building rights
acquired for the Myllypuro development project and 181 residential units in
Åkersberga Centrum. Building 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. In July 2010, 181 residential units in Åkersberga Centrum
were sold to Tegeltornet AB.
EUR million 30 Sept. 2010 30 Sept. 2009 31 Dec. 2009
At period-start 26.0 - -
Investments 0.1 - 8.3
Disposals -28.2 - -
Exchange differences 2.1 - -
Transfers from investment properties 0.0 - 17.7
At period-end - - 26.0
9. Cash and Cash Equivalents
EUR million 30 Sept. 2010 30 Sept. 2009 31 Dec. 2009
Cash in hand and at bank 21.4 19.4 13.5
Short-term deposits 65.1 - 6.4
Total 86.5 19.4 19.8
10. Derivative Financial Instruments
EUR million 30 Sept. 2010 30 Sept. 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 124.7 -2.2 66.0 -0.4 48.8 -1.2
1-2 years 40.0 -1.5 118.9 -0.9 70.0 1.0
2-3 years 213.4 -13.3 40.0 -2.0 60.0 -3.0
3-4 years 207.9 -15.1 204.8 -12.1 262.9 -14.5
4-5 years 155.2 -6.2 202.1 -11.0 198.0 -7.3
over 5 years 151.7 -6.3 143.1 -3.6 97.9 -4.0
Subtotal 892.9 -44.5 774.8 -30.1 737.6 -29.0
Nominal Fair Nominal Fair Nominal Fair
amount value amount value amount value
Foreign exchange derivatives
Forward agreements
Maturity:
less than 1 year - - 3.0 -0.1 22.0 -0.2
Total 892.9 -44.5 777.9 -30.2 759.7 -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 loss of EUR -0.7 million (gain EUR
3.6 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 865.5 million (EUR 750.4 million). The fair value loss recognized under
other comprehensive income taking into account the tax effect totals EUR -7.8
million (EUR -5.8 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 128.7
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 Sept. 2010 30 Sept. 2009 31 Dec. 2009
Mortgages on land and buildings 36.1 43.0 42.9
Bank guarantees 43.6 43.5 45.4
Capital commitments 34.1 44.5 44.0
On 30 September 2010, Citycon had capital commitments of EUR 34.1 million (EUR
44.5 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
30 Sept. 2010 30 Sept. 2009 Change-% 2009
Earnings per share (basic), EUR 0.29 -0.05 - -0.16
Earnings per share (diluted), EUR 0.28 -0.05 - -0.16
Equity per share, EUR 3.36 3.41 -1.5% 3.31
Net asset value (EPRA NAV) per
share, EUR 3.58 3.64 -1.5% 3.54
Equity ratio, % 35.9 35.9 - 34.2
The formulas for key figures can be found from the 2009 annual financial
statements.
The figures are unaudited.
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 - SEPTEMBER 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 September 30, 2010 and the related statements of comprehensive income,
changes in equity and cash flows for the nine-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 September 30, 2010, and of its financial performance and its cash flows
for the nine-month period then ended, in accordance with the Securities Market
Act.
Helsinki, October 12, 2010
Ernst & Young Oy
Authorized Public Accountants
Tuija Korpelainen, Authorized Public Accountant
[HUG#1451294]