Citycon Q1/2021: Quarter over quarter growth - 06.05.21 - News

HELSINKI, May 6, 2021

CITYCON OYJ Interim Report 6 May 2021 at 09:00 hrs

- NRI EUR 50.4 million -3.8% compared to Q1/2020: an improvement over the previous quarter
- Total tenant sales at -4.7% y-o-y
- Administrative expenses improved -13% y-o-y due to tight cost control
- Direct operating profit EUR 44.9 million (-2.9%) reflecting NRI development
- Slightly positive valuations supported by positive leasing momentum
- Divestment of 3 non-core assets as a part of planned capital recycling and portfolio transformation
- LTV lowered to 46.5% as a result of the divestment
- Successful issue of EUR 350 million green bond as a part of planned refinancing

JANUARY – MARCH 2021

- Net rental income in Q1 was EUR 50.4 million (Q1/2020: 52.4). Net rental income continued to be impacted by COVID-19 pandemic and its impact on footfall and vacancy, as well as discounts granted in Q2/2020 to tenants and specialty retail and parking income. The impact of the pandemic was partially offset by an acquisition in Norway in Q1/2020, which increased net rental income by EUR 0.8 million. Stronger currencies further increased net rental income by EUR 0.9 million.
- EPRA Earnings were EUR 31.6 million (34.8) as result of net rental income, increased direct financial expenses and lower direct share of profit of joint ventures and associated companies. However, direct administrative expenses decreased by 13% from comparison period. EPRA Earnings per share (basic) was EUR 0.178 (0.195), impact from stronger currencies being EUR 0.004 per share.
- Adjusted EPRA earnings were EUR 27.6 million (30.8).
- IFRS-based earnings per share was positive EUR 0.12 (0.06) mainly as a result of higher fair value gains.

KEY FIGURES

Q1/2021

ARIVA.DE Börsen-Geflüster

Kurse

Citycon

3,982 €

+0,08%

Q1/2020

%

FX
Adjusted % 1)

2020

Net rental income

MEUR

50.4

52.4

-3.8 %

-5.4 %

205.4

Direct Operating profit 2)

MEUR

44.9

46.2

-2.9 %

-4.6 %

180.4

IFRS Earnings per share (basic) 3)

EUR

0.12

0.06

-

-0.25

Fair value of investment properties

MEUR

4,238.4

4,081.5

3.8 %

-

4,152.2

Loan to Value (LTV) 2) 4)

%

46.5

45.7

1.8 %

-

46.9

EPRA based key figures 2)

EPRA Earnings

MEUR

31.6

34.8

-9.1 %

-11.7 %

136.6

Adjusted EPRA Earnings 3)

MEUR

27.6

30.8

-10.3 %

-13.1 %

120.3

EPRA Earnings per share (basic)

EUR

0.178

0.195

-9.1 %

-11.7 %

0.767

Adjusted EPRA Earnings
per share (basic) 3)

EUR

0.155

0.173

-10.3 %

-13.1 %

0.676

EPRA NRV per share

EUR

11.58

11.53

0.4 %

-

11.48

1) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.
2) Citycon presents alternative performance measures according to the European Securities and Markets Authority (ESMA) guidelines. More information is presented in Basis of Preparation and Accounting Policies in the notes to the accounts.
3) The adjusted key figure includes hybrid bond coupons and amortized fees.
4) The Q1/2021 LTV calculation is adjusted for a EUR 29 million deferred payment in other receivables related to asset disposals.

CEO F. SCOTT BALL:

Q1/2021 was in line with our expectations and tracks our full year guidance. COVID-19 continued to challenge our business through government restrictions in some of our operating countries. Yet, our results remained on a solid level and reflect the resilience of our strategy and stability of our markets. Importantly, results improved from the prior quarter Q4/2020.

Tenant sales decline remained modest at -4.7%. The stability of tenant sales also reflects the strength of our strategy which is based on having a large share of necessity tenants and locations in densely populated major markets in the portfolio. Our strategy and the attractiveness of our locations for our tenants to run profitable business translated into strong leasing activity and we signed 64 thousand square meters of new leases compared to 53 thousand square meters in Q1 2020. Importantly, the average rent of both signed leases and the whole portfolio increased as a result of active leasing strategy and a leading indicator for future results.

Net rental income slightly declined (-3.8%) compared to Q1/2020 but remained on a solid level being 50.4 million for the quarter. While NRI is slightly lower compared to pre-pandemic Q1/2020, it is informative that Q1 NRI increased from the previous quarter. Direct operating profit 44.9 MEUR also exceeded previous quarter but was, however, -2.9% compared to last year. EPRA earnings per share was EUR 0.178 compared to EUR 0.195 reflecting the operational performance in the COVID-19 environment. Continued financial support from each Nordic country has helped insulate our financial results.

The strength of our portfolio was highlighted by the divestment of three lower-tier, non-core assets in the Stockholm area in line with our capital recycling strategy. Also, the outlook for commercial real estate transactions in the Nordics has turned positive. This development is a clear indication of the demand for high-quality Nordic real estate assets and supports the value of the portfolio. Citycon continues its programmed capital recycling and is looking into divestment opportunities across the Nordics. The market sentiment has improved particularly in the Norwegian transaction market but we have received several inquiries in other regions as well.

Citycon continued its planned refinancing and issued a green bond of 350 MEUR in Q1 at highly attractive pricing. The demand for the bond was extremely strong with an orderbook close to five times over-subscribed. Citycon's bond spreads have returned to pre-covid levels, which allowed Citycon to issue the bond with a coupon of 1.625%, which is the second lowest in the company's history. The new issue premium was also one of the lowest for any corporate Eurobond in 2021. Citycon also continued to make progress with its portfolio transformation strategy at numerous locations and announced a new development project in Liljeholmen, which is a growing area in the heart of Stockholm with a connected train station. The project, in co-operation with the City of Stockholm, is another showcase of our strategy combining transit-oriented necessity driven retail with modern residential and office premises. In suburban Helsinki, the construction of Lippulaiva and 8 adjacent residential buildings progressed as planned with the expected opening in April 2022.

Overall, Q1 was a solid quarter with several significant events amid signs of improving fundamentals. The strength of Citycon's strategy was validated not only by stable financial and operational results but also successful capital recycling and bond transactions that give important insight on the outlook of our business. We remain committed to our diversification through densification strategy and continue to progress our portfolio transformation. The outlook for 2021 remains unchanged and will be partially dependent on the roll-out of the vaccine, after which we anticipate a robust reboot in consumer spending as evidenced in the markets where the vaccination roll-out is more progressed.

OUTLOOK (unchanged)

Citycon forecasts the 2021 direct operating profit to be in range EUR 170-188 million, EPRA EPS EUR 0.651-0.751 and adjusted EPRA EPS EUR 0.558-0.658.

Direct operating profit

MEUR

170-188

EPRA Earnings per share (basic)

EUR

0.651-0.751

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