Citycon Q1: Solid start to the year
JANUARY–MARCH 2015
- Turnover decreased to EUR 60.1 million (Q1/2014: EUR 61.3 million) mainly due to divestments and the weaker Swedish krona that further impacted net rental income which came to EUR 39.8 million (EUR 40.1 million).
-Net rental income of like-for-like properties increased by EUR 0.8 million, or 2.4%, excluding the impact of the weaker Swedish krona. The growth was especially driven by the Swedish business unit.
- EPRA Earnings increased by EUR 5.6 million, or 26.0% mainly due to substantially lower direct net financing expenses. EPRA Earnings per share (basic) was EUR 0.046 (EUR 0.049).
- Earnings per share was EUR 0.05 (EUR 0.06). The reduction was mainly a result of lower net fair value gains of investment properties and higher average number of shares following the share issuances in June–July 2014. On the contrary, net financial expenses were lower by EUR 4.5 million or 32.9% mainly thanks to a lower amount of debt, the weaker Swedish krona and a lower average interest rate.
Key figures
IFRS based key figures | Q1/2015 | Q1/2014 | %1) | 2014 | |
Turnover | MEUR | 60.1 | 61.3 | -2.0 | 245.3 |
Net rental income | MEUR | 39.8 | 40.1 | -0.7 | 169.4 |
Profit/loss attributable to parent company shareholders | MEUR | 27.0 | 28.6 | -5.8 | 84.5 |
Earnings per share (basic) | EUR | 0.05 | 0.06 | -29.7 | 0.16 |
Net cash from operating activities per share | EUR | 0.05 | 0.06 | -27.9 | 0.13 |
Fair value of investment properties | MEUR | 2,801.7 | 2,744.3 | 2.1 | 2,769.1 |
Loan to Value (LTV) | % | 40.8 | 50.3 | - | 38.6 |
EPRA based key figures | Q1/2015 | Q1/2014 | %1) | 2014 | |
EPRA Operating profit | MEUR | 34.9 | 35.5 | -1.7 | 149.8 |
EPRA Earnings | MEUR | 27.2 | 21.6 | 26.0 | 99.7 |
EPRA Earnings per share (basic) | EUR | 0.046 | 0.049 | -6.0 | 0.191 |
EPRA NAV per share | EUR | 2.92 | 3.04 | -4.0 | 3.01 |
1) % is calculated from exact figures and refers to the change between 2015 and 2014.
CEO, MARCEL KOKKEEL:
‘Citycon had a solid start to the year with positive like-for-like net rental income growth of 2.4%, stable valuations and continued strong occupancy. The Swedish portfolio showed a strong performance, while the challenging retail market in Finland continued. The short-term impact of ongoing (re)developments and disposals of non-core assets also weigh on Finnish turnover this year.
Following last year’s substantial financing arrangements, Citycon’s average cost of debt is at an historically low level. For the first quarter, we were able to deliver an EPRA Earnings per share close to last year’s level, which we consider to be a good result given the considerably stronger balance sheet and increased number of shares.
For 2015, we expect market conditions to remain challenging in Finland, but with a strong portfolio of daily shopping in urban locations and a continued focus on operating efficiencies we believe that we can continue to produce a solid set of results. We leave the guidance for 2015 unchanged.’
BUSINESS ENVIRONMENT
The economic outlook in Citycon’s operating countries remained relatively unchanged during the first quarter of 2015. The macroeconomic environment in Sweden, Estonia and Denmark remained strong, while market conditions continued to be weak in Finland.
In 2015, the European Commission forecasts Euro area GDP growth to reach 1.3%, with Sweden (2.3%), Estonia (2.3%) and Denmark (1.7%) showing stronger growth figures. The GDP growth for Finland (0.8%) is expected to remain modest for a fourth year in a row and is dependent on both the recovery of the country’s export markets as well as domestic demand.
During the reporting period, consumer confidence levels have stayed relatively stable in Citycon’s operating countries. The consumer confidence levels in the Nordics remain positive, while the consumer confidence in Estonia is slightly negative. In general, the Euro area still struggles with negative consumer confidence. During the quarter, consumer prices increased modestly in Sweden and Denmark, while Finland, Estonia and the Euro area showed slightly negative inflation. (Sources: Statistics Finland/Sweden/Estonia/Denmark) The unemployment rates are substantially below the Euro area average (11.3%) in all Citycon’s operating countries. (Source: Eurostat)
Retail sales growth for the first two months of 2015 has been strong in Estonia (8.0%) and Sweden (4.8%), positive in Denmark (0.8%) and negative in Finland (-1.6%). (Sources: Statistics Finland/Sweden/Estonia/Denmark) Prime shopping centre rents in Finland remained stable compared to the previous quarter, but decreased slightly year-on-year. In Sweden, year-on-year prime shopping centre rents increased by 2-3%. In Estonia, prime shopping centre rents remained stable in Q1. In Finland, the weak outlook for retail sales limits the rental growth potential going forward and prime rents are expected to remain unchanged. In Estonia, rental growth is expected to remain marginal and occur mainly due to indexation. In Sweden, prime rents are forecasted to increase by approximately 2% in 2015 and are expected to perform better than secondary retail rents in terms of growth. (Source: JLL)
In Finland, the first quarter of 2015 continued the increased activity seen on the investment market in 2014. The demand for core assets remains strong and prime shopping centre yields have remained stable. Finnish prime yields are forecasted to stay stable during 2015, while a slight compression is expected for Estonian prime yields due to the shortage of investment grade properties and a more active market environment. The transaction volume of Swedish retail property was around SEK 6.3 billion during the quarter. Prime shopping centre yields have moved in during the last 6 months given strong demand and low supply, as well as continued low interest rates. (Source: JLL)
OUTLOOK
In 2015, Citycon expects its EPRA Operating profit to change by EUR –8 to 0 million and its EPRA Earnings to change by EUR 6 to 14 million from the previous year. The company forecasts an EPRA EPS (basic) of EUR 0.175–0.195.
These estimates are based on the existing property portfolio as well as on the prevailing level of inflation, the euro-krona exchange rate, and current interest rates. Premises taken offline for planned or ongoing (re)development projects reduce net rental income during the year.
Helsinki, 29 April 2015
Citycon Oyj
Board of Directors
For further information please contact:
Marcel Kokkeel
CEO
Tel. +358 20 766 4521 or +358 40 154 6760
marcel.kokkeel@citycon.com
Eero Sihvonen
CFO, Executive Vice President
Tel. +358 20 766 4459 or +358 50 557 9137
eero.sihvonen@citycon.com
Citycon is an owner, developer and manager of urban grocery-anchored shopping centres in the Nordic and Baltic region, managing assets that total approximately EUR 3.4 billion and with market capitalisation of EUR 1.8 billion. Citycon is the No. 1 shopping centre owner in Finland and Estonia and among the market leaders in Sweden. Citycon has also established a foothold in Denmark.
Citycon has investment-grade credit ratings from Standard & Poor's (BBB) and Moody's (Baa2). Citycon Oyj’s share is listed in NASDAQ Helsinki.