Citycon's financial statements 1 Jan. -

CITYCON OYJ STOCK EXCHANGE BULLETIN 12.2.2004 11.00 AM Citycon's financial statements 1 Jan. - 31 Dec. 2003 - Net profit for the financial year rose to EUR 14.3 million (EUR 13.8 million). This figure includes EUR 0.5 million in losses on sales of fixed assets (capital gains EUR 0.7 million). - Turnover was EUR 78.1 million (EUR 79.0 million). - Operating profit was EUR 43.3 million (EUR 43.9 million). - Earnings per share were EUR 0.14 (EUR 0.14). - The proposed dividend is EUR 0.14/share (EUR 0.09/share), which represents 100.0 per cent of the net profit. - Demand for retail premises and occupancy rates continued to be strong. - Citycon's acquisitions of shopping centres in 2003 will boost the company's turnover and net profit for 2004. KEY FIGURES 1-12 2003 1-12 2002 Turnover, EUR million 78.1 79.0 Operating profit, EUR million 43.3 43.9 % of turnover 55.5 55.6 Profit before extraordinary items and taxes, EUR million 19.1 19.2 Net profit for the year, EUR million 14.3 13.8 Earnings per share, EUR 0.14 0.14 Equity per share, EUR 2.01 1.96 P/E ratio 11 8 Dividend per share, EUR (Board of director's proposal) 0.14 0.09 Return on equity, % 7.1 7.1 Return on equity including minority interest, % 4.9 4.8 Return on investment, % 5.8 6.0 Equity ratio, % 44.9 48.4 Equity ratio, with capital loan not counted as part of shareholder's equity, % 36.7 39.1 Net rental income of property portfolio, % 8.5 8.6 Occupancy rate, % 97.3 97.8 Personnel at the year-end 34 33 The trend in the business environment Growth in retail sales was slower than in the previous year although it was still strong. According to Statistics Finland, department store trade was up by 5.6 per cent and convenience goods trade by 3.7 per cent on the previous year's figures. Consumer demand grew in Finland faster than in the rest of the euro zone. Strong retail sales meant that the demand for leased commercial premises continued to be good and vacancy rates remained low, particularly in the Helsinki Metropolitan Area and other major Finnish cities. In the Helsinki Metropolitan Area the vacancy rate for commercial property was 1.0 per cent and it was 1.3–2.5 per cent in Tampere, Lahti and Jyväskylä. Citycon's strong position in the present state of the market is based on its focus on retail commercial premises, which account for more than 98 per cent of the company's property portfolio. The greater part, 47.4 per cent, of the property portfolio is in the Helsinki Metropolitan Area and 35.6 per cent is in other major Finnish cities. The customers and the trend in the portfolio of leases Citycon's customer structure did not change markedly in 2003. The company's largest customer group is comprised of Finnish and international convenience and utility goods chains as well as companies in the banking and finance sector. The properties acquired during the financial year, i.e., the shopping centres Jyväskylän Forum and holdings in shopping centres Tampereen Koskikeskus and Valkeakosken Koskikara, increased the number of leases held by Citycon by 263 and the number of lessees by 226. At year-end Citycon had 1,371 (1,150) leases with 770 (700) lessees. The average duration of the leases is 3.6 years. Rental income Approximately 67 per cent of Citycon's rental income came from leases signed with the 10 biggest customers. Net rental income from leasing business in 2003 totalled EUR 54.7 million (EUR 56.2 million). Shopping centres accounted for 50.2 per cent (49.3%) of net rental income and supermarkets and shops accounted for 49.8 per cent (50.7%). The rental occupancy rate of Citycon's entire property portfolio was 97.3 per cent (97.8%). The shopping centres' net yield rate amounted to 8.1 per cent (8.2%) and the net yield rate of the supermarkets and shops amounted to 8.9 per cent (9.1%). The rental income of the shopping centres acquired by Citycon at the end of December 2003 (Tampereen Koskikeskus and Valkeakosken Koskikara) is not included in the company's income stated for 2003. Turnover and operating profit Citycon's turnover in 2003 was EUR 78.1 million (EUR 79.0 million). The company's turnover is mainly comprised of rental income from retail business premises, which accounted for 93.3 per cent (93.3%) of turnover. Citycon's 15 shopping centres and 15 biggest supermarkets generated roughly 78.9 per cent of its rental income. Operating profit for the financial year was EUR 43.3 million (EUR 43.9 million). Operating profit was down on the previous year's figure due to the effect of sold properties. The net profit for the financial year was EUR 14.3 million (EUR 13.8 million). The figure for net profit includes losses on the sale of fixed assets totalling EUR 0.5 million (capital gains EUR 0.7 million). Balance sheet and financing At the end of 2003, Citycon owned 148 real properties with a combined book value of EUR 721.8 million (EUR 649.2 million). The properties' market value as assessed by an authorised property appraiser was EUR 726.5 million (EUR 650.1 million). The balance sheet total as at 31 December 2003 was EUR 835.3 million (EUR 746.3 million), of which liquid cash assets accounted for EUR 15.1 million (EUR 11.7 million). The Group's financing situation remained favourable. To finance the shopping centre Jyväskylän Forum, a EUR 25 million syndicated loan was drawn down and Tampereen Koskikeskus and Valkeakosken Koskikara were financed with a EUR 45 million syndicated loan. The periods and terms of the loans are similar to the financing agreement made in November 2002. The increase in liabilities reduced the Group's equity ratio during the financial year by 3.5 percentage points to 44.9 per cent. The liabilities on the consolidated balance sheet as at year-end totalled EUR 457.5 million (EUR 383.3 million). Interest-bearing debt amounted to EUR 512.3 million (EUR 440.5 million), of which the capital loan accounted for EUR 68.5 million (EUR 68.5 million). Citycon's net financing expenses declined to EUR 24.2 million (EUR 24.7 million). The average interest rate on interest-bearing liabilities was 5.5 per cent (5.5%). The average loan period, weighted according to the principal of the loans, was 4.6 years (5.5 years) and the average interest-rate fixing period was 4.0 years (4.1 years). The Group's equity ratio was 44.9 per cent (48.4) and 36.7 per cent (39.1) when the capital loan is excluded from shareholders' equity. At the end of 2003, Citycon's interest-bearing debt included 87 per cent (84%) floating rate loans, of which 69 per cent (50%) had been changed to fixed rate using interest rate swaps and 12 per cent (33%) was hedged through interest rate caps. The par value of the interest rate swaps at year-end was EUR 302.2 million (EUR 199.0 million) and that of the interest rate caps was EUR 53.8 million (EUR 132.5 million). The market value of the derivatives as at 31 December 2003 was -EUR 11.4 million (-EUR 12.0 million). The interest coverage ratio(the previous twelve months' profit before interest expenses, taxes and depreciation to net financing expenses), which describes the debt servicing ability, was 2.1 (2.1). Citycon and IFRS Citycon will make the changeover to reporting in accordance with IAS/IFRS (International Financial Reporting Standards) in its interim reports and financial statements in 2005. Citycon made decisions on the main optional accounting principles for financial statements under IFRS in the beginning of 2004. According to a preliminary analysis, the adoption of IFRS will affect the following subdivisions of Citycon's accounting principles: Citycon has decided to use the fair value model in the valuation of properties, whereupon changes in value will be entered in the profit and loss account. Derivatives used to hedge interest rates of loans will be treated in accordance hedge accounting principles, whereupon the derivatives will be valued at the fair value and the change in value will be booked in shareholders' equity. The capital loan will be treated under IFRS as a debt. Compliance with IFRS principles for financial statements will affect the amount of deferred tax liabilities and credits. The presentation of joint holdings in the financial statements will change. Investments Citycon's gross investments in 2003 totalled EUR 84.2 million (EUR 5.9 million), of which new purchases accounted for EUR 79.5 million. Acquisitions of real property The main property acquisitions of the year were the shopping centre Jyväskylän Forum, which the company acquired from If P&C Insurance Ltd in October, and a transaction effected in December with Polar Real Estate Corporation, in which Citycon acquired Polar's holdings in Tampereen Koskikeskus and Valkeakosken Koskikara. After the transaction, Citycon's share of the gross leasable area of Koskikeskus rose from 27 to 88 per cent. Following the deal, Citycon owns 55 per cent of the area od Koskikara. The purchase price for Jyväskylän Forum was EUR 28.3 million and the combined price for Koskikeskus and Koskikara was EUR 49.3 million. In addition, a letter of intent was made with Polar Real Estate Corporation for the acquisition of Seinäjoen Torikeskus in February 2004. Divestments Citycon sold six properties and reduced its holdings in two more in accordance with its strategy in 2003. Sales of fixed assets resulted in a loss of EUR 0.5 million. Other investments Citycon invested a total of EUR 4.8 million in major renovations of buildings and building development projects during the financial year. The Shopping Centres Division's most important project was an extension to Porin IsoKarhu in which Citycon invested EUR 3.2 million during the financial year. The project advanced to the construction stage according to plan and the company estimated that the extension would be completed on schedule in August 2004. Demand for new leasable premises was good, and at year-end the rental occupancy rate for the facilities was 90 per cent. By Citycon's estimate, the extension project will increase IsoKarhu's rental income by 40 per cent. In 2003, the Shopping Centres Division continued the planning for extensions to the shopping centres Myyrmanni in Vantaa and Lippulaiva in Espoo. In addition, the division devoted efforts to the commercial development of the shopping centre Jyväskeskus. The aim is to enhance the commercial attractiveness of Jyväskeskus through a new anchor lessee and by developing the property's restaurant services etc. The company invested roughly EUR 2 million in the development of Jyväskeskus. The investments will have positive impact on company figures mostly in 2005. The Supermarkets and Shops Division completed development projects for the Citymarket department store in Pori and a supermarket in the Mankkaa district of Espoo in partnership with the lessee. The aim of the projects is to enhance the properties' market positioning. Citycon invested roughly a million euros in the projects. The investments stimulated the properties' rental income in the final quarter of the year under review. The Supermarkets and Shops Division also carried out another, similar development project at a supermarket in Valkeakoski. Citycon invested some EUR 0.8 million in the project. The investment will boost the property's rental income by 12 per cent from the beginning of 2004. The Property Development Division formerly called the Retai Park Division, continued to investigate the commercial framework for new shopping centres in the Helsinki Metropolitan Area and in the Tampere and Turku market zones. Citycon deployed effort in the processes of land acquisition and zoning according to plan during the period under review. Organisation, personnel and salaries In the beginning of 2003, Citycon defined its divisional structure and organisation. The company separated its operations into three divisions on the basis of property types: Shopping Centres, Supermarkets and Shops, and the Retail Park Division (currently the Property Development Division). The Citycon Group had a total of 34 (33) employees at year-end, of whom 27 (27) were employed by the parent company. The Citycon Group paid EUR 2.1 million in salaries and emoluments, of which CEO's salaries and emoluments amounted to EUR 0.2 million and those of the Board of Directors to EUR 0.1 million . The parent company paid EUR 1.8 million in salaries and emoluments, of which the CEO's ans managing directors'salary and emoluments were EUR 0.2 million and those of the Board of Directors were EUR 0.1 million. Citycon shares Citycon's share capital on 31 December 2003 was EUR 142,800,108.30 and the number of shares was 105,777,858. The par value of a share is EUR 1.35. A significant change in the company's ownership base took place in November when its main owners, Nordea Bank Finland Plc, Kesko Corporation with its subsidiaries, and Sampo Life Insurance Company Limited sold off their entire holding, representing 73.8 per cent of the company's shares and voting rights, through the Helsinki Exchanges. During the financial year, the turnover of shares picked up in the Helsinki Exchanges and there were substantial changes in the company's ownership base. The turnover was 104.5 million shares and EUR 153.8 million (8.6 million shares and EUR 9.1 million). At year-end, the company had a total of 1,450 registered shareholders. The registered shareholders had a total of 46.1 million shares or 43.6 per cent and nominee-registered shareholders had 59.7 million or 56.4 per cent of the total number of shares and voting rights. The high price quoted during the financial year was EUR 1.59 (EUR 1.12) and the low was EUR 1.00 (EUR 0.98). The weighted average price for the period was EUR 1.47 (EUR 1.06) and the closing price of the year was EUR 1.52 (EUR 1.10). The company's market capitalisation on 31 December 2003 was EUR 154.9 million (EUR 112.1 million), when company-held shares are deducted from the total. During the year, the HEX index rose by 4.4 per cent and the HEX portfolio index by 16.2 per cent. The HEX investment index rose by 26.5 per cent. Citycon's share price rose correspondingly by 38.2 per cent. Citycon Oyj held 3,874,000 of its own shares at the end of the period under review. The total purchase price of the shares was EUR 4.7 million. The company-held shares represent 3.7 per cent of all shares and voting rights. The book value of company-held Citycon shares on 31 December 2003 corresponded to the purchase price, which was lower than the market value on the date of closing the books.The effect of the shares in the company's possession has been deducted for the calculation of the key indicators. The members of Citycon Oyj's Board of Directors held a total of 98,541 shares on 31 December 2003, which is 0.09 per cent of the company's shares and voting rights. Citycon's CEO owned 100,000 and the other members of the Corporate Management Committee owned a total of 3,000 shares on 31 December 2003. Authorisations Citycon's annual general meeting of 20 March 2003 granted the Board of Directors an authorisation to decide on increasing the share capital by means of one or more new issues of shares, in such a way that the total number of shares subscribed in the new issue is no more than 21,085,106 new shares in the company with a par value of EUR 1.35 per share and the company's share capital may be increased by a maximum of EUR 28,464,893.10. The authorisation includes an entitlement to waive existing shareholders' preemption rights. The annual general meeting also granted the Board of Directors an authorisation to decide, within one year of the AGM, on buying back and surrendering company shares. The maximum number of shares that may be bought back will have a combined par value, combined with the par value of the shares already held by the company, equivalent to five per cent of the company's share capital and of the voting rights conferred by all the shares. The authorisation therefore gives entitlement to buy back a maximum of 1,414,892 shares. The authorisation to surrender company shares covers all the company shares acquired on the basis of the entitlement granted to the Board of Directors as well as all other company shares already held by the company. Company shares may be bought back and surrendered, for example, as consideration in prospective property or share transactions or for the acquisition of other assets of importance to the company's business. At the end of 2003, no part of the authorisations had been utilised. The authorisations will be valid from the decision made by AGM for a maximum of one year. Board of Directors and auditors The annual general meeting of 20 March 2003 re-elected the following to the Board of Directors: Stig-Erik Bergström, DSc (Econ); Heikki Hyppönen MSc (Econ); Juhani Järvi, MSc (Econ); Jorma Lehtonen, MSc (Eng); Carl G. Nordman, Counsellor of Industry (Hon); and Juha Olkinuora, MSc (Eng). The Board of Directors re-elected Stig-Erik Bergström as its chairman and Jorma Lehtonen as deputy chairman. The company's auditors re-elected were Ari Ahti, Authorised Public Accountant, and Jaakko Nyman, APA, with the APA firm KPMG Wideri Oy Ab as deputy auditor. Proposal by the Board of Directors for the payment of dividend Citycon's Board of Directors will propose to the annual general meeting convening on 15 March 2004 that dividend is paid on shares in non-company ownership for the financial year ending on 31 December 2003 in the amount of EUR 0.14 per share. The Board of Directors will propose 18 March 2004 for the dividend payment's date of record and 25 March 2004 for the payment date. Outlook for the future Because growth in retailing and in consumer demand is forecast to continue in 2004, Citycon estimates that demand, occupancy rates and rent levels for retail premises will remain good in the Helsinki Metropolitan Area and Finland's major cities. Citycon estimates that the turnover and net profit for 2004 will make positive progress relative to the previous year based on favourable market prospects and because of the shopping centres acquired at the end of 2003. Helsinki, 12 February 2004 Citycon Oyj Board of Directors Further information is available from: CEO Mr Petri Olkinuora, tel +358 400 333 256, CFO Ms Pirkko Salminen, tel. +358 9 680 36730 Distribution: Helsinki Exchanges and main media CONSOLIDATED INCOME STATEMENT EUR million 1-12 2003 1-12 2002 Turnover 78.1 79.0 Other income -0.5 0.7 Operating profit 43.3 43.9 Financing expenses (net) -24.2 -24.7 Profit before extraordinary items and taxes 19.1 19.2 Profit for the period 14.3 13.8 CONSOLIDATED BALANCE SHEET EUR million Assets Fixed assets Intangible assets 4.5 4.0 Tangible assets 729.1 625.5 Financial assets 78.6 97.7 Company shares 4.7 4.3 Fixed assets, total 816.9 731.5 Current assets Debtors 3.4 3.1 Cash in hand and at bank 15.1 11.7 Current assets, total 18.5 14.8 Assets, total 835.3 746.3 Liabilities and shareholders' equity Shareholders' equity 209.6 204.0 Capital loan 68.5 68.5 Minority interest 99.8 90.5 Liabilities 457.5 383.3 Long-term 428.3 371.8 Short-term 29.2 11.5 Liabilities and shareholders' equity, total 835.3 746.3 Gross investments in balance sheet fixed assets 84.2 5.9 as % of turnover 107.9 7.4 Depreciation and value adjustments 6.5 7.6 Employees, average 33 33 CASH FLOW STATEMENT EUR million 1-12 2003 1-12 2002 CASH FLOW FROM BUSINESS OPERATIONS Profit/loss before extraordinary items 19.1 19.2 Adjustments: Depreciation 6.5 7.6 Financial income and expenses 24.2 24.7 Other adjustments 0.9 -0.2 Cash flow before change in working capital 50.8 51.4 Change in working capital 0.0 0.0 Cash flow from business operations before financing items and taxes 50.7 51.4 Interest paid and payments for other financing expenses of business operations -24.1 -23.8 Dividends and interests received from business operations 0.5 0.2 Direct taxes paid -4.7 -3.6 Cash flow from business operations (A) 22.4 24.2 CASH FLOW FROM INVESTMENTS Investments in tangible and intangible assets -4.9 -1.9 Shares in subsidiaries purchased -77.1 -5.8 Shares in subsidiaries sold 1.4 1.2 Shares in associated companies purchased -0.8 -1.3 Shares in associated companies sold 1.6 5.2 Other items 0.1 0.1 Cash flow from investments (B) -79.7 -2.7 CASH FLOW FROM FINANCING Fund payments by minority 0.0 0.1 Withdrawals of short-term loans 2.1 0.0 Repayments of short-term loans 0.0 -7,1 Withdrawals of long-term loans 67.9 3.9 Repayments of long-term loans -0.2 -4.3 Dividend paid and other distribution of profit -9.2 -8.2 Cash flow from financing (C) 60.6 -15.5 Change in cash assets (A+B+C) increase (+)/decrease (-) 3.3 6.0 Cash assets at start of accounting period 11.7 5.8 Cash assets at end of accounting period 15.1 11.7 FINANCIAL INDICATORS 1-12 2003 1-12 2002 Earnings per share, EUR 0.14 0.14 Equity per share, EUR 2.01 1.96 Return on equity (ROE), % 7.1 7.1 ROE with minority interest included, % 4.9 4.8 Return on investment (ROI), % 5.8 6.0 Equity ratio, % 44.9 48.4 Equity ratio with capital loan not counted as as shareholders' equity, % 36.7 39.1 COMPANY SHARES 1-12 2003 1-12 2002 Acquired between 25 November 1999 and 31 December 2003 Number of shares, million 3.9 3.9 Total par value, EUR million 5.2 5.2 Share of shareholders' equity, % 3.7 3.7 Share of voting rights, % 3.7 3.7 Acquisition cost paid, EUR million 4.7 4.7 The book value of company-held Citycon shares on 31 December 2003 corresponded to the purchase price, which was lower than the market value at year-end. The effect of the shares in the company's possession has been deducted for the calculation of the key indicators. CONSOLIDATED CONTINGENT LIABILITIES EUR million Mortages on land and buildings 338.4 323.4 Pledged shares 76.7 96.5 Other pledges given 3.2 0.6 GROUP'S DERIVATIVES EUR million 31.12.2003 31.12.2002 Par Fair Par Fair values values values values Interest-rate derivatives Interest-rate swaps Maturing in 2004 50.0 -1.5 Maturing in 2007 78.2 1.1 Maturing in 2008 50.0 -1.3 Maturing in 2009 91.0 -5.4 66.0 -5.1 Maturing in 2010 83.0 -5.8 83.0 -5.4 Total 302.2 -11.4 199.0 -12.0 Interest-rate options Interest rate caps purchased Maturing in 2003 78.7 Maturing in 2004 53.8 0.0 53.8 0.0 Total 53.8 132.5 The fair values for derivatives describe their value if all agreements had been closed at the market prices of the balance sheet date. Derivatives have been used for hedging of the loan portfolio. The accrued interest for the financial year included in the derivatives' fair values, being EUR 0.6 million (EUR 0.3 million) has been booked in interest expenses. Capital gains on sales of fixed assets in 2002 have been separated from the turnover figure. The taxes used were the taxes corresponding to the net profit for the year.


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