Citycon Oyj

everyone and welcome to Citicon's fourth quarter and full year 24 results audio cast. My name is Anni Torkko and I work as the investor relations manager here at Citicon. Last night we published our full year 2024 financial results and I would like to direct you to the investor relations section of our website where you will find all results materials. Today, together with me in the call, I have our interim CEO, Mr. Scott Ball, and our CFO, Mr. Eero Sihvonen. We will start by Scott going through our business and operational highlights. And after that, Eero will go through our financial results. After the presentation, we will be opening the line for questions from the audience. Please, Scott.

Thanks, Annie. Good morning, everyone. Thank you for attending our full year 2024 financial results call. Citicon enjoyed strong growth in its operational business in 24, posting 184 million euros in direct operating profit. On the back of this strong performance, total direct operating profit grew by 12% for the year, adjusted upper earnings by 12.1%, and total net rental income by 10.3%, all measured with comparable FX compared to the same period, 2023. Excluding divested assets and acquisitions, like-for-like net rental income grew 4.6% compared to the same period in 2023 and comparable FX. These results are within the Q3 guidance with adjusted EPRA EPS slightly higher than guidance. Demand for space in our properties remains strong. The retail occupancy rate increased 20 basis points over the prior quarter to 95.3% and average rents increased 4.6% to 25 euros per square meter. The company signed over 175,000 square meters of leases during 2024, a 33% increase over the 132,000 square meters leased in 2023. New tenant openings included a 7,300-square-meter Prisma Hypermarket in Mirmani, a 3,200-square-meter Selver grocery store in Roka Almari, an 1,800-square-meter fitness gym also at Roka, and the first Nike concept store in Finland at Iso-Omena. In December, CityCon announced that it had signed a lease agreement with Turvistalo for an over 4,000 square meter medical center hospital in Trio. This further reinforces our tenant mix, which is over 20% grocery and 11% municipal services and healthcare. As noted in prior calls, the tenant portfolio is 82% non-fashion oriented. These large new deals further improved the strong credit profile of our tenant base and the quality of our grocery municipal anchored urban hubs and resulted in a rent collection rate of 99%. In 2024, Citicon completed important measures to restructure its operations, reduce expenses, and improve its balance sheet. Actions to reduce costs included the outsourcing of accounting, and decentralization of day-to-day decision-making to the individual countries. This includes all operations as well as our leasing efforts, which will be directed at the country level. There are new managing directors in place to drive the business for their respective countries, and each country also has a separate board of directors made up of CityCon board members and senior management to provide oversight. These actions completed in 2024 provide for a reduction in G&A overhead to approximately 23 million euros for 2025 onwards. Citicon also issued two new bonds during the year without size demand from the market as the bonds were seven and 10 times oversubscribed and further improved the debt maturity profile. The company also made the decision to suspend dividend payments and repay short-term debt to push out the average maturity schedule. In addition, the company significantly reduced capital expenditures for 2024 and planned further reductions in capital expenditures for 2025 amount to approximately 21 million euros. Earlier this month, Citicon continued the process to delever and repaid €150 million of its secured €250 million term loan facility. The expansion in yields impacted the valuation of the portfolio during 2024, which was partially offset by realized rent growth occurring in our assets, resulting in an increase in the market rents used in the valuation models within all of our main markets. For the year, the book value of our assets decreased by 74.6 million euros. As interest rates continue to decline, spreads should tighten, which should positively impact valuations for 2025. Ero will provide more detail in his financial review later on the call. As of January 1, the company had 770 million euros of liquidity. Given this strong liquidity position, we are pacing asset sales in a manner that allows us to effectively deploy the cash generated. For 2024, we had asset disposals of 354 million euros, with proceeds continuing to be used to repay debt. Total divestments as of year-end 2024 reached €475 million since the publication of our divestment target, resulting in a 50% completion of that €950 million target by 2026. We anticipate another €250 million divestments through 2025 and intend to hit our full divestment target in 2026. As we begin 2025, the company's operational results are among some of the best within the peer group. However, there is still room to further accelerate rent growth. The company's occupancy cost ratio is one of the lowest in the industry at 9.4%, and our tenants continue to experience sales growth, which provides Citicon ample headroom for compounding rent growth. In addition, our country team operating model is up and operating with separate board oversight for each country. Taken together, these factors give us confidence that 2025 results will continue to build on the strong performance in 2024 and is reflected in our guidance. As a result, the guidance for 2025 EPRA EPS is in the range of 41 to 53 cents and EPRA EPS excluding hybrid interest is 60 to 72 cents. Lastly, I want to welcome Mr. Oleg Zaslavsky to Citicon as a new CEO starting on the 1st of March. As a professional with 20 years of experience in the real estate sector, I am confident that he will bring fresh eyes and valuable expertise to Citicon and lead the company towards even greater financial and operational results. I, along with the rest of the Board of Directors, will be supporting OLEG during the transition period and moving forward. I want to also extend my thanks to everyone on the CityCon team for their hard work this past year. With that, I'd like to hand the call over to Arrow to provide a financial overview.

Thank you, Scott, and it's great to be back and I'm very pleased to be speaking to you again. First of all, there is a snapshot of the financials. I will review the main topics very briefly and then go more in detail in each of those. Citigroup had a strong year operationally. Our net rental income did grow by approximately €20 million, or 9.7%, to €214.7 million. Our EPRA earnings also improved to €113 million, a 3.1% improvement. In per share terms, EPRA EPS, there was a slight reduction due to the increased share count during the year. But also in terms of EPS, solid performance at 62 cents per share. Our EPRA net replacement value, the reduction of that mainly reflects the changes in valuation items, and I will also come back to that in a while. The detailed net rental income bridge, I will mainly concentrate on the bottom part, i.e. the full year picture. And here you can see that the main component of the increased improved net rental income relates to Gista. Early last year, we bought the remaining 50% of Gista in Stockholm, Sweden. And as a result, we fully consolidate the asset. and therefore, just net rental income fully is included. We had a positive like-for-like development, quite significantly, like 6.6 million, as Scott already mentioned, and redevelopments coming on stream impacted by approximately 3 million. And as mentioned, the total net rental income for the year ended up at 214.7. Similar analysis for the EPRA earnings, and as can be seen, net rental income for the full year increased by 20 million, 20.1 million, we had an increase in financial income and expenses, mainly due to two factors. Number one, we also now consolidate the financing costs related to CHISTA, and even more importantly, of course, like everybody knows, interest costs have been increasing, and our average cost of debt is somewhat higher. But nevertheless, the overall performance in terms of EPRA earnings was positive, i.e. we had a growth from 109.6 to 113.8 million euros. Then turning over to valuation, The full-year property valuation loss was 74.6%, i.e. 1.9% of the total value. and we had a negative valuation in last quarter of 158 million, negative, and that had to do mainly with the wider yield requirements, wider so-called cap rates by approximately 20 basis points. And I have noticed already earlier, during earlier years, that when there are yield movements, the Nordic normally comes after UK and Central Europe, so like a stabilization of the yields came to this region a bit later. or is coming a bit later. But anyway, the overall performance, 1.9% reduction, i.e. 75 million, is as mentioned here. Then we have had a lot of attention during 2024 and the beginning of 2025 in balance sheet improvement, and substantial actions have been taken, like Scott already alluded to. We issued a new bond, this 350 million bond, which now matures in 2030. That was issued very successfully in December. And since the end of the year, some actions that can't be seen here yet, because they happened after the closing of the full yearbooks, but we have already repaid 150 million of this 250 million term loan that can be seen under 27. We are also contemplating a bond tender of our nearest term, a bond, 350 million. A bond we are contemplating to buy back or tender 100 million of that bond. And rationale, the reasons behind all of these activities is naturally to to reduce the refinancing concentration that appears between 26 and 27, and to increase and lengthen the weighted average maturity of our debt portfolio. And we have been very successful in doing that so far, and now the weighted average maturity of our debt portfolio at year-end was 3.4 years, and weighted average interest rate also at the end of the year was 3.6%. The key credit metrics can be seen here, loan-to-value in terms of IFRS, the net debt to EBITDA, which can be seen here 9.3 times, interest cover ratio 2.7 times, still ample headroom compared to our covenants and other metrics, but naturally somewhat lower due to the fact that the interest rates have increased just like for every other company. And that concludes my part of the presentation. Back to you, Anni.