Citycon Oyj (CTY1S) Earnings Call Transcript

Good morning, everyone. Welcome to Citycon's half yearly results presentation. My name is Anni Torkko and I work in the IR here at Citycon, and together with me here in the morning, I have Eshel Pesti, our CEO; and Hilik Attias, our CFO. Eshel and Hilik will now present the results of Citycon and you can submit questions throughout the presentation, and we will address them in the end, and you can use the Q&A function at the bottom. Next, I will give the speech to Eshel and Hilik.

Huomenta, and thank you for coming. We will start the results of the 6 months. We had a very good opening of the 2026. Our like-for-like growth is 5.6%. Our occupancy rate is 94.4%. We lost around 0.9%. Retail average rent increased by 1% to EUR 28.5 per square meter. Footfall, like-for-like growth by 3.1%. And the like-for-like tenant sales increased by 2.6%. The fair value grew by EUR 2.7 million and NRI margin is 94.2%. The key achievement in the first half, we signed leases for about 20,700 square meter. The leasing spread is 9.9%, which is impressive. The like-for-like general mall leasing increased by 26%, which is extraordinary. The operating expenses, we cut for 5.5%. And we actually buy back our bond for '26 and '27 in an amount of EUR 252 million. We took a loan of EUR 214 million in order to stabilize our financial situation. The like-for-like NRI growth for the first half of the year, you see that Sweden donate almost 8%, Norway 5.8% and Finland 4.1%. In total, the average is 5.6%, while the European average growth for this year is 3.5%, and this is actually the -- I would say third quarter, including the last quarter of last year that we are actually beating the European average. And we can see that it's not a coincidence. This is a trend. Go ahead. Regarding divestment, we signed LOI for 3 assets in Finland, Myyrmanni, Koskikeskus and Trio. The deal is a conditional deal on the day of the closing, the buyer, which is Noga Finland, will issue an IPO in the stock exchange in Tel Aviv. And based on the success IPO we will do the transaction. As I mentioned, we signed an LOI, and we believe that between today to 45 days, we are expecting the closing. We are in discussion with a few potential buyers regarding assets in Sweden and in Norway, but nothing is mature yet. And now I'll give the floor to Hilik to do the financial overview.

Thank you, Eshel. So as Eshel mentioned, strong results in the performance, NRI for the quarter, EUR 57.5 million versus EUR 53.3 million. That's a 7.8% growth, 5.9% with the FX adjustment. And you can see for the half year, 5.7% growth and 3.9% with FX adjustment and of course, taking into account the Lippulaiva resi divestment, NRI loss, that 3.9% would grow to around 5%. Direct operating profit again, here, we show a 4.6% increase from EUR 47.7 million to EUR 50.8 million also in the year 4.9% increase EUR 96.6 million versus EUR 90.4 million. On the EPRA earnings, EUR 17.6 million resemble to the Q2 2025 and also the half year the same trend, EUR 36.6 million versus EUR 36.9 million. The EPRA earnings, excluding hybrids, EUR 25.7 million, sorry, versus EUR 26.3 million and the half year EUR 52.8 million versus EUR 54.3 million. That's EUR 0.10 per share in the quarter and EUR 0.20 for the half year. The EPRA NRV landed at EUR 7.64 million and -- versus EUR 8.29 million in Q2 2025. In the bridge, you can see that our solid results in the NRI growth and the G&A reduction that is a consistent effort for management to try to cut expenses. We're subsidizing the increased cost that we have here. This is -- the main driver here is the higher interest rate environment in the refinancing process and is reflected by the interest expenses, somewhat offset by the buyback of hybrid bonds, you can see EUR 1.3 million. On the recent financing actions, we accomplished a lot of actions in the first half year, derisking the balance sheet and while extending maturities. We've done early redemptions of 2026 and 2027 bonds. On the one hand, we drew a secured loan with favorable terms, EUR 214 million. On the other hand, that's the interest-bearing liabilities went down by EUR 38 million quarter-to-quarter. And we also entered into EUR 200 million related party credit facility where we gave a loan EUR 70 million to G City with 6.5% interest arm's length. In the amortization schedule, you can see average debt to maturity was going up to 3.5 years from 3.2. Weighted average interest rate, 4.72%, that's an increase. We try to offset it by entering into secured financing, which has favorable terms. But again, the interest environment is still higher than the current coupons. And on the key credit metrics, you can see that we're still in a very good place, loan-to-value 51.4%. Net debt to EBITDA, 10.1. Interest coverage ratio at 2.2. And of course, Citycon is in compliance with all of our -- all of its covenants.

That was about the presentation. And next, we will go into the Q&A session.

[Operator Instructions] And we have a few questions coming in on the line. So the first one is related to divestments. How do you plan to use the proceeds from divestment of the 3 shopping centers in Finland?

Well, in case we will execute the transaction, then I believe that we'll buy the next bonds that we have on the line is 2028 and some hybrids.

Then we have another question, which is partly related to the same. So also asking about the divestments what the net proceeds from this portfolio would be? And maybe we can take the different parts to the question. So this is the first, what the net proceeds would be. I can take the second after your answer.

Hilik.

I think that we've mentioned that we're talking about book value, latest appraisal, which is EUR 422.6 million. And of course, customary adjustments would be made. But this is what we're experiencing and this is still all under negotiation and conditional deal.

Okay. Then the second one coming from the same is the related to the vendor financing. If that will be in addition to the mutual loan agreement together with G City.

No. Maybe people are confused. There is nothing to do with G City about the, let's say, 1 minute that Noga will go for the IPO. Once Noga is a public company, is no more G City. And the vendor loan will be to Noga Finland, which will be a public company that G City will hold, if I remember, not more than 25%. So the -- it will be to be a real public company. And we will give vendor loan as we gave vendor loan before when we do divestment in the year before, not more than 20%.

Then on additional questions. Do you plan any dividends during the second half year in '26?

We didn't plan it yet.