Citycon financial statements release 2022: Strong like-for-like NRI growth and profit performance; 2023 guidance midpoints initiated above consensus estimates

16 Feb 2023 19:25 CET

Citycon Oyj   Stock exchange release 16 February 2023 at 20:25 hrs

CITYCON RESULTS SUMMARY:
Continued operational performance
Q4/2022

· Like-for-like net rental income in Q4 increased 11.9% compared to the
previous year
· Like-for-like footfall increased 3.7%
· Like-for-like tenant sales in Q4 increased 0.4%; 5.7% higher than the same
period in Q4/2019 (pre-pandemic level)

Q1-Q4/2022

· Like-for-like net rental income increased 6.6%
· Like-for-like footfall increased 9.7%
· like-for-like tenant sales increased 5.2% compared to previous year and 6.2%
compared to Q1-Q4/2019 (pre pandemic level)
· Q1-Q4/2022, total average rent per sq.m. increased by EUR +1.1 to EUR 23.7
per sq.m through the combination of indexation and positive leasing spread of
2.0%
· (Indexation is calculated at the end of each year so 2023 will benefit
from 2022 inflation levels)

Divestments continued

· In Q4/2022 Citycon sold two non-core centres in Norway for approximately EUR
120.8 million.
· EUR 380 million remaining of stated 24-month disposition target of EUR 500
million of non-core assets.

· In 2022, Citycon sold in total 4 non-core assets in Norway for approx. EUR
266 million.
· Demonstrated liquidity of necessity-based Nordic retail assets
· Sold at approximately book value
· Asset sale proceeds used to repay debt

Strengthening the balance sheet remains a key priority

· In December, Citycon repurchased EUR 4 million of notional bonds in the open
market with approx. EUR 3.8 million of cash
· In 2022, Citycon repurchased EUR 112.3 million of notional bonds with
approx. EUR 102.5 million of cash
· average yield of 4.9%.

· In January 2023, Citycon tendered in total EUR 57.4 million of notional 2024
bond and hybrid bonds issued in 2019 and 2021 with approx. EUR 41.4 million of
cash

CEO, F. SCOTT BALL:
I am very pleased to report a strong finish to 2022 as our strategy of creating
necessity-based, grocery and municipal anchored urban hubs continued to produce
excellent results for both the fourth quarter and the full-year that met and
exceeded our guidance.
Operationally, like-for-like net rental income increased 11.9% in Q4 and 6.6% in
2022 compared to the previous year. We were pleased to see continued strong
demand for our centres from both new and existing tenants, as evidenced by our
excellent leasing activity with over 174,000 sq.m. of signed leases in 2022 with
positive leasing spreads of 2.0%, resulting in retail occupancy up 120 bps to
95.4%. At the same time, average rent per square meter increased by 1.1 EUR to
23.7 EUR/s.qm. during the year.
We continue to see very strong growth in both footfall and tenant sales. In
2022, like-for-like tenant sales increased by 5.2% and footfall 9.7% compared to
the previous year. Notably, tenant sales are already 6.2% above 2019 levels,
again highlighting the quality and attractiveness of Citycon´s grocery- and
municipal-anchored centres and their resilience during the pandemic
On the transaction front, for the full year, we sold four non-core assets for
EUR 266 million at approximately book value, which provides further evidence of
the attractiveness and desirability of necessity-based, inflation protected
Nordic retail assets to institutional investors. We continued to demonstrate the
inherent value and liquidity of Citycon´s portfolio. In December, we sold two
additional non-core assets in Norway for EUR 120.8 million. This transaction
represents the first tranche of the asset sale target that we announced in
November, to sell EUR 500 million of non-core assets over the next 24 months.
With these recent divestments, our remaining disposition target now stands at
approximately EUR 380 million. Further, these sales also bolster the validity of
our underlying portfolio asset values, particularly given that these
transactions were for non-core properties.
Despite challenging macroeconomic headwinds, the market valuation for our income
producing assets remained relatively static.  Independent appraisers marked a
slight decline of EUR 0.8 million for the consolidated portfolio, excluding
Torvbyen (a small non-core asset in Norway) which was marked down EUR 15.9
million in Q4 as a result of a closure for structural damage.  When including
maintenance capex and IFRS 16 adjustments the decline excluding Torvbyen was
only approximately EUR 40 million or 1.0%.  It is clear that while there were
few comps for appraisers to use in determining values, the fact that the company
sold 4 assets over the year at values approximating book value underscored the
fact that this portfolio remains attractive to asset level investors.
Phase 1 of Lippulaiva (our newest asset), which opened in March 2022, generated
strong operational results in its first nine months with retail occupancy at
96%. Notably, grocery stores account for approximately 45% of the tenant mix
with necessity goods representing over 70% of Lippulaiva's 44,000 sq.m. of gross
leasable area. Lippulaiva is a true testament to Citycon's strategy of recycling
and redeploying capital into high quality, irreplaceable assets in growing urban
areas.  The centre is built on a brand-new metro station, which opened in early
December 2022. It was the world's first retail centre to be awarded smart
building's gold certificate, due to it being carbon neutral and a shining
example of our commitment to sustainability.  In addition to the retail
offerings, the first residential tower at Lippulaiva opened in late December
2022 and the remaining three towers in the first quarter of 2023. This will
create additional demand for the property and diversified revenue streams for
the company. We are very pleased with how Lippulaiva has been received by the
local community and are confident that it will continue to develop into the
social and commercial hub of the area. It is also important to note that,
following the completion of Lippulaiva centre and the residential towers, we now
have minimal capital commitments in 2023 and anticipate our annual capital
expenditures to be materially lower in 2023 than prior years.
In addition to demonstrating strong private market demand for retail assets, we
continued our disciplined capital allocation by using sales proceeds to
repurchase our bonds and take advantage of the large discounts and dislocation
in the secondary markets. Through these actions we reduced our future interest
expense, while also improving our overall balance sheet and debt profile. During
2022, Citycon repurchased EUR 112.3 million of notional bonds for approx. EUR
102.5 million of cash at an average yield of 4.9%. Subsequent to year-end, we
launched a public tender to repurchase a combination of our hybrid bonds and our
bond maturing in October 2024. In that transaction, we deployed EUR 41.4 million
of cash to repurchase EUR 57.4 million of notional bonds, resulting in a cash
savings of EUR 16.0 million to par and annual cash interest savings of EUR 2.1
million.
We are committed to maintaining our investment-grade balance sheet, and have a
strong and flexible financial position with no significant near-term maturities
until the end of 2024, and 100% of our assets unencumbered. This position of
strength provides various levers we can pull to execute our strategy and
continued portfolio transformation to core, necessity-based centres with organic
opportunities for growth. As evidenced by our actions in 2022 and in the early
part of 2023, further strengthening our balance sheet and credit metrics remains
a top priority.
Our unique assets function as last mile logistics centres for the delivery of
daily goods and services for our communities in the largest cities in the
Nordics combined with direct connections to public transportation. Our mix of
high credit tenants are less reliant on consumer discretionary spending, which
provides a level of resilience and stability reflected in our results that bode
well as we look forward into 2023. We are well positioned operationally with a
proven stable business model that has performed well regardless of macroeconomic
pressures. This combination is enhanced by the fact that 93% of our leases are
linked to indexation and stand to benefit in 2023. This provides meaningful
organic growth for net rental income, which is reflected in the outlooks we are
providing today. We also have the benefit of having a low occupancy cost ratio
of 9.1 %, and increasing tenant sales in an inflationary environment. This
positions Citycon to increase rents and service charges without jeopardizing our
tenants' ability to continue to run profitable businesses. Further, we will
benefit from a full-year of Lippulaiva being open, in addition to starting to
benefit from the residentials which are coming online early this year.
Taken together, these factors give us confidence that 2023 results will continue
to build on our strong performance in 2022, even after factoring in the recent
Norwegian asset sales late last year.  Our guidance reflects the benefit from
inflation as indexation pushes our rents higher not only for 2023, but also
future years, the growth of which will compound and grow exponentially. As a
result, our estimated outlook is for 2023 direct operating profit to be in range
EUR 174-192 million, EPRA EPS EUR 0.69-0.81 and adjusted EPRA EPS EUR 0.51-0.63.

STANDING PORTFOLIO KEY FIGURES 1)

Q4/202 Q4/202 % Q1 Q1-Q4/2021 %
2 1 -Q4/20
22
Net rental income MEUR 49.2 44.7 10.2 195.1 180.3 8.2 %
%
Direct operating MEUR 42.5 37.5 13.2 166.2 153.4 8.3 %
profit 2) %

EPRA based key
figures 2)
EPRA Earnings MEUR 29.9 22.8 31.0 113.6 101.7 11.8 %
%
Adjusted EPRA MEUR 22.2 15.1 46.5 83.1 77.3 7.5 %
Earnings 3) %
EPRA Earnings per EUR 0.178 0.131 35.8 0.676 0.574 17.8 %
share (basic) %
Adjusted EPRA EUR 0.132 0.087 51.9 0.495 0.437 13.2 %
Earnings per share %
(basic) 3)

1) Standing portfolio key figures include only income and expenses from
investment properties that were on group balance sheet on 31 December 2022. The
portfolio is the same in the reporting period and in the comparison period,
hence the numbers are comparable. Lippulaiva (opened on the 31st of March 2022)
is included in the standing portfolio.
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 and amortized fees.

KEY FIGURES

Q4/2022 Q4/2021 % FX Adjusted % 1)
Net rental income MEUR 51.2 49.3 3.9 % 6.1 %
Like-for-like net % 11.9 % 2.9 % - -
rental
income development
Direct operating MEUR 45.1 42.2 7.0 % 9.3 %
profit  2)
IFRS Earnings per EUR -0.50 0.23 - -
share (basic) 3)
Fair value of MEUR 4040.1 4189.2 -3.6 % -
investment
properties
Loan to Value (LTV) % 41.4 40.3 2.7 % -
2) 4) 6)

EPRA based key
figures 2)
EPRA Earnings MEUR 32.5 27.5 18.5 % 21.2 %
Adjusted EPRA MEUR 24.8 19.8 25.5 % 29.5 %
Earnings 3)
EPRA Earnings per EUR 0.194 0.158 22.8 % 25.6 %
share (basic)
Adjusted EPRA EUR 0.148 0.114 30.1 % 34.3 %
Earnings per share
(basic) 3)
EPRA NRV per share 5) EUR 11.01 12.15 -9.3 % -
7)

Q1-Q4/2022 Q1-Q4/2021 % FX Adjusted % 1)
Net rental income MEUR 203.6 202.3 0.7 % 1.2 %
Like-for-like net % 6.6 % -1.5 % - -
rental
income development
Direct operating MEUR 175.2 176.1 -0.5 % 0.0 %
profit  2)
IFRS Earnings per EUR -0.15 0.55 - -
share (basic) 3)
Fair value of MEUR 4040.1 4189.2 -3.6 % -
investment
properties
Loan to Value (LTV) % 41.4 40.3 2.7 % -
2) 4) 6)

EPRA based key
figures 2)
EPRA Earnings MEUR 122.6 124.4 -1.4 % -0.8 %
Adjusted EPRA MEUR 92.1 100.0 -7.9 % -7.2 %
Earnings 3)
EPRA Earnings per EUR 0.730 0.703 3.9 % 4.6 %
share (basic)
Adjusted EPRA EUR 0.548 0.565 -3.0 % -2.2 %
Earnings per share
(basic) 3)
EPRA NRV per share 5) EUR 11.01 12.15 -9.3 % -
7)

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 and amortized fees.
4) Highly liquid cash investments has been taken into account in net debt.
5) Calculation updated from this and comparison periods. Divided by number of
shares at balance sheet date instead of average amount of shares during the
reporting period.
6) LTV Q4/2021 changed due to correction related to presentation of IFRS 16
assets. Previously reported LTV for Q4/2021 was 40.7%
7) The effect of currency rates to EPRA NRV/share was EUR -0.79.
OUTLOOK FOR 2023

Direct operating profit MEUR 174-192
EPRA Earnings per share (basic) EUR 0.69-0.81
Adjusted EPRA Earnings per share (basic) EUR 0.51-0.63

The outlook assumes that there are no major changes in macroeconomic factors and
that there will not be another wave of COVID-19 with restrictions resulting in
significant store closures and no major disruptions from the war in Ukraine.
These estimates are based on the existing property portfolio as well as on the
prevailing level of inflation, the EUR-SEK and EUR-NOK exchange rates, and
current interest rates.
AUDIOCAST

Citycon's investor, analyst and press conference call and live audiocast will be
organized on Friday, 17 February 2023 at 2:00 p.m. EET. The audiocast can be
participated by calling in and followed live on the following
website: https://citycon.videosync.fi/full-year-2022
Questions for the management can be presented by phone. To ask questions, join
the teleconference by registering on the following
link: http://palvelu.flik.fi/teleconference/?id=10010506
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:
Bret McLeod
Chief Financial Officer
Tel. +46 73 326 8455
bret.mcleod@citycon.com
Sakari Järvelä
VP, Corporate Finance and Investor Relations
Tel. +358 50 387 8180
sakari.jarvela@citycon.com (laura.jauhiainen@citycon.com)
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 4.3 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 investment-grade credit ratings from Moody's (Baa3) and Standard &
Poor's (BBB-). Citycon's shares are listed on Nasdaq Helsinki Ltd.
www.citycon.com

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