Citycon Q1-Q3/2024: Accelerated total NRI growth driven by strong operational performance and further solidifying the balance sheet

CITYCON OYJ   Interim Report   6 November 2024 at 19:05 hrs

Strong operational performance in Q1-Q3/2024

-          In comparable FX rates, total net rental income increased by 11.2%.

• Total net rental income increased by 10.6% compared to the previous year.

-          Like-for-like net rental income increased by 5.2%.

-          FX impact on total net rental income was EUR -0.9 million.

-          Average rent per sq.m. increased by 4.1% with comparable FX to EUR 24.7 per sq.m (vs. Q3/2023).

-          Retail occupancy 95.1% (vs. 94.9% in Q3/2023), including Kista.

-          Like-for-like footfall increased 0.2%.

-          Like-for-like tenant sales increased 1.9%.

-          Fair value change of investment properties in Q1–Q3/2024 EUR 84.0 million, including Kista.

• In Q3/2024 fair value change of investment properties was EUR 14.7 million.

 

The strengthening of the balance sheet as a priority

Q1/2024

-          Citycon continued to improve its balance sheet by EUR 48.2 share issue which was 4-times oversubscribed.

-          Citycon placed a EUR 300 million green bond with an orderbook approximately seven times oversubscribed.

-          Citycon executed approx. EUR 213 million tender of its bond maturing in October 2024.

Q2/2024

-          Citycon successfully executed an EUR 266 million exchange for its 2024 hybrid for a new hybrid and cash amount.

-          Citycon executed a make-whole for the remaining amount (EUR 97 million) of its bond maturing in October 2024.

-          Citycon signed and closed the transaction to sell Kongssenteret in Kongsvinger, Norway.

-          Citycon improved its credit maturity profile by extending its EUR 400 million revolving credit facility and EUR 250 million term loan by one year until 2027 and SEK 2,060 million term loan until 2029.
 

Q3/2024

-          Citycon signed and closed the transaction to sell Trekanten in Oslo, Norway for a gross price of approx. EUR 112 million.
 

Post Q3/2024

-          In October 2024 Citycon signed an agreement to divest an upcoming residential property in Barkarbystaden, Stockholm, Sweden. Closing will be in December 2024.
 

KEY FIGURES		Q3/2024	Q3/2023	%	FX Adjusted Q3/2023	FX Adjusted % 1)
Net rental income	MEUR	54.7	48.4	13.0 %	48.1	13.7 %
Like-for-like net rental income development	%	3.9 %	7.0 %	-	-	-
Direct operating profit 2)	MEUR	49.1	42.7	15.0 %	42.4	15.7 %
IFRS Earnings per share (basic) 3)	EUR	-0.07	-0.32	79.5 %	-0.32	79.9 %
Fair value of investment properties	MEUR	3,699.6	3,990.3	-7.3 %	-	-
Loan to Value (LTV) 2)	%	47.5	43.9	8.2 %	-	-
EPRA based key figures 2)
EPRA Earnings	MEUR	32.4	29.1	11.4 %	28.9	12.1 %
Adjusted EPRA Earnings 4)	MEUR	23.4	21.8	7.1 %	21.7	8.0 %
EPRA Earnings per share (basic)	EUR	0.176	0.173	1.7 %	0.172	2.3 %
Adjusted EPRA Earnings per share (basic) 4)	EUR	0.127	0.130	-2.3 %	0.129	-1.5 %
EPRA NRV per share 5)	EUR	8.92	10.43	-14.5 %	-	-
		Q1-Q3/2024	Q1-Q3/2023	%	FX Adjusted Q1-Q3/2023	FX Adjusted % 1)	Q1-Q4/2023
Net rental income	MEUR	160.4	145.1	10.6 %	144.2	11.2 %	195.7
Like-for-like net rental income development	%	5.2 %	6.9 %	-	-	-	6.5 %
Direct operating profit 2)	MEUR	137.7	123.1	11.9 %	122.3	12.6 %	164.8
IFRS Earnings per share (basic) 3)	EUR	0.37	0.18	-	0.17	-	-0.70
Fair value of investment properties	MEUR	3,699.6	3,990.3	-7.3 %	-	-	3,858.2
Loan to Value (LTV) 2)	%	47.5	43.9	8.2 %	-	-	46.3
EPRA based key figures 2)
EPRA Earnings	MEUR	86.5	80.9	6.9 %	80.2	7.8 %	109.6
Adjusted EPRA Earnings 4)	MEUR	70.1	59.1	18.5 %	58.5	19.9 %	80.6
EPRA Earnings per share (basic)	EUR	0.476	0.482	-1.2 %	0.478	-0.3 %	0.651
Adjusted EPRA Earnings per share (basic) 4)	EUR	0.386	0.352	9.6 %	0.348	10.9 %	0.479
EPRA NRV per share 5)	EUR	8.92	10.43	-14.5 %	-	-	9.30

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 key figure includes hybrid bond coupons, amortized fees and gains/losses and expenses on hybrid bond repayments.

4)       Starting from the beginning of 2024, Citycon excludes reorganisation and one-time costs (Q1-Q3/2024: EUR 7.2 million) from Adjusted EPRA Earnings. Due to this, Adjusted EPRA Earnings is not fully comparable with the previous year. The adjusted key figure includes hybrid bond coupons and amortized fees.

5)       The effect of currency rates to EPRA NRV/share was EUR -0.18.

INTERIM CEO SCOTT BALL:

Operational performance accelerated in Q3/2024 continuing the trend throughout the year, resulting in a +13.7% total NRI increase in Q3/2024 against Q3/2023 and +11.2% YTD total NRI increase with comparable FX rates compared to the previous year.  The strong operational result is due, in part to an increase in average rent/sq.m. which rose by +4.1% with comparable FX rates to 24.7 EUR/sq.m. (Q3/2023: 23.7 EUR/sq.m.).  These results also include the acquisition of 100% of Kista and the divestments of two assets during the year.  Further, retail occupancy grew slightly to 95.1% (Q3/2023: 94.9%).  Leasing activity remains strong with 109,000 sq.m. new leases signed in Q1-Q3/2024.  New tenants opened during 2024 include two major supermarkets 7,300 sq.m.  Prisma grocery in Myyrmanni and Selver grocery in Rocca al Mare, Gym! fitness 1,800 sq.m. in Rocca al Mare, and the first Nike concept store in the Helsinki suburban area at Iso Omena.  On the back of our operational performance we saw a EUR +14.7 million fair value gain in Q3/2024 and EUR +84.0 million in Q1-Q3/2024.

Our Q1-Q3/2024 EPRA EPS and adjusted EPRA EPS results were 0.476 EUR (-1.2%) and 0.386 EUR (+9.6%) respectively compared to the previous year.  One-time items impacting the EPRA EPS and adjusted EPRA EPS include the two executed divestments, Kongssenteret and Trekanten, the EUR 48 million share issue, delayed consolidation of Kista by one month, delay of Barkarby handover as we are about to divest the residential property, and EUR 7.2 million in reorganisation and one-time costs, including severance costs.  FX rates also impacted the results but was offset by EUR 2.7 million gain on hedging of the NOK.

Our commitment to the investment grade credit rating and strengthening our balance sheet remain key priorities for Citycon as we make continued progress growing our funds from operations and deleveraging the company.  Our divestment criteria includes; selling retail assets outside capital cities, non-retail development, as well as properties where we have maximized the asset value.  During the third quarter of 2024 the company completed the second divestment of the year at Trekanten in Norway resulting in YTD divestments of around EUR 145 million.  Additionally, in October 2024 Citycon announced that it has signed an agreement to divest Barkarby in Sweden.  Our remaining divestment pipeline contains approximately EUR 400 million under LOI or advanced negotiations, therefore we are confident that we will exceed the previously announced divestment targets, EUR 380 million as of 2024 year-end and EUR 950 million as of 2025 year-end.  Divestment proceeds will be used to pay down debt and improve our debt metrics.

Moving into Q4/2024 we will accelerate the operational actions that we committed to for 2024, which includes reducing expenses to offset the increase in finance costs.  We have completed the consolidation of corporate functions to Iso Omena and outsourcing of our accounting.  In addition, we are planning to decentralize day-to-day decision making to the country level in order to improve results and to provide full P&L accountability to these teams.  While our operational performance is consistent with the best performers of our peer group, we believe we have the opportunity to further accelerate this performance.  Specifically, our occupancy cost ratios (OCR’s) continue to remain stubbornly low at 9.4% providing at least 200 basis point of headroom based upon a study we commissioned from Savills.  We believe these moves will enable us to capture additional rents and make significant headway in increasing our OCR’s.  These actions will also contribute to meeting our targeted run-rate G&A of approximately EUR 20 million moving into 2025.  Lastly, capital expenses have been reduced from EUR 96 million to approximately EUR 40 million for this year.  This reduction in capital spending will also accelerate into 2025, with planned spending to be approximately EUR 20 million.

Citycon owns true “fortress-like” assets that are irreplaceable.  The locations of our real estate in the largest capital cities combined with the “bullet-proof” merchandising necessity goods and municipal services have generated strong performance with room to grow rents even faster.  Our active and robust divestment pipeline will allow us to substantially improve our debt metrics as we pay down debt with proceeds from these sales.  Moving forward we will further solidify our balance sheet while generating more production out of our remaining assets ultimately positioning us for sustainable growth.

OUTLOOK (Specified 6 November 2024)
 

		Current outlook	Previous outlook
Direct operating profit	MEUR	183–187	183–187
EPRA Earnings per share (basic)	EUR	0.61–0.63	0.59­­­–0.63
Adjusted EPRA Earnings per share (basic)	EUR	0.47–0.49	0.45–0.49

The outlook assumes that there are no major changes in macroeconomic factors and no major disruptions from the war in Ukraine. These estimates are based on the existing property portfolio, including Kista 100% and impact from executed divestments, as well as existing estimates of inflation, EUR–SEK and EUR–NOK exchange rates, and interest rates.

AUDIOCAST

Citycon's investor, analyst and press conference call and live audiocasting will be held on Thursday, 7 November 2024 at 10:00 am EET. The audiocast can be participated by calling in and following live at this website: https://citycon.videosync.fi/q3-2024

Questions for the management can be presented by phone. To ask questions, join the teleconference by registering on the following link:  https://palvelu.flik.fi/teleconference/?id=50048752

After the registration you will be provided with phone numbers and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to enter the queue.

The audiocast will be recorded and it will be available afterwards on Citycon’s website.

CITYCON OYJ

For further information, please contact:
Sakari Järvelä
Chief Financial Officer
Tel. +358 50 387 8180
[email protected]

Citycon is a leading owner, manager and developer of mixed-use real estate featuring modern, necessity-based retail with residential, office and municipal service spaces that enhance the communities in which they operate. Citycon is committed to sustainable property management in the Nordic region with assets that total approximately EUR 4.0 billion. Our centres are located in urban hubs in the heart of vibrant communities with direct connections to public transport and anchored by grocery, healthcare and other services that cater to the everyday needs of customers.

Citycon has an investment-grade credit rating from Standard & Poor's (BBB-). Citycon Oyj’s shares are listed on Nasdaq Helsinki.

www.citycon.com