Citycon Oyj

Good morning everyone and welcome to Citycon's half yearly 2025 results audio cast. My name is Anni Torcco and I work as the investor relations manager here at Citycon. Last night we published our half yearly report and in this audio cast our CEO Oleg Soslavski and CFO Eero Sihonen will present the results. We will start by Oleg going through our business and operational highlights. After that Eero will go through our financial result. After the presentations we will be opening the line for questions from the audience. Please Oleg.

Thank you Anni. Good morning and thank you all for joining today's call. We just closed the first half of 2025 with solid momentum and continue to deliver stable operational results. In the period we achieved .2% of NRI growth, like for like NRI growth, while maintaining high retail occupancy at the level of 95%. We also saw modest improvement but stable improvement in like for like tenant sales and food flow, which underlines the continued resilience of our necessity-based retail centres. As you can see our NRI growth came from all our segments and markets with Finland and Estonia leading the way with an impressive 7.6%. Our average rent per square metre grew 3% to 25.8 euro per square metre. During the quarter we performed external valuations of approximately 92% of our portfolio covering all assets in Finland, Sweden and Norway. The result was 34.3 million net fair value gain primarily driven by improved cash flow in our key assets. And we see in this fair value gain a beginning of the stabilisation and our asset values and hope for the beginning of the rebound in asset values in the future. During the first half of the year we also continue to manage our debt. In six months we repaid effectively over 750 million of debt, including loans and debt. We will continue further to repay our debt and strengthen our balance sheet. As a result of a new green bond issued in April 2025, 400 million bond, our financial cost increased during the period. But despite the increase in financial cost we would like to reaffirm our guidance for full year 2025 at the level of between 41 to 50 cents for APRA earnings per share and between 60 to 69 cents for APRA earnings per share excluding hybrid bond interest. Thank you. And with this I would like to transfer the stage to Eero to guide you through the details of our financial performance.

Yes, thank you. Thank you all again. Good morning. Good morning everybody. I will start with the highlights of the quarter and the year so far. So we had a net rental income of 53.3 million for the quarter, which was 1.4 million below previous year's second quarter. And we had APRA earnings of 17.5 compared to 25.3 million one year ago, i.e. 7.8 million less. And I will now explain the main points and main differences between the two years and two quarters. And turning over to detailed net rental income bridge for the quarter. As mentioned, on a quarterly basis we had 1.4 million less net rental income, but actually that was a good achievement taken into the account that we had disposals of 5.3 million. And that was largely compensated by a good performance in our existing -for-like properties. We had on a quarterly basis 6.8 percent -for-like improvement of our net rental income. And also if we look at the first six months on the bottom of this page, where we had disposals impacting negatively by 10.5 million, we had a positive input from the -for-like properties of 4.2 million, i.e. approximately 5.2 percent -for-like for the first six months. And as a result, our net rental income came down only 2.3 million despite the disposals. If you then have a look at the EPRA earnings, and nowadays of course the EPRA earnings are after hybrid costs, the impact is bigger due to the fact that we refinanced our power part of our hybrid stack. The first hybrid bond was refinanced in the beginning of 24, and the impact of that on a quarterly basis is approximately 2 million. And we had quite substantial savings in SG&A, and the impact of other financing apart from hybrid was 1.2 million negative on a quarterly basis and 2.8 million on a like a six-monthly basis. So these numbers are quite modest taken into the account that we have achieved a very substantial de-risking of the balance sheet, which I will come back in a while. And we have refinanced a lot of legacy bonds which were at quite low historical levels. So taking all of this on board, it was a good quarter and good first six months. Then turning over to property valuation and the EPRA per share. One of the highlights of the quarter, and in my opinion, one of the most important highlights was the fact that we conducted essentially a full external valuation. And I say essentially because not exactly everything was externally appraised, but approximately 92 percent of our properties were externally appraised by our regular appraisers. JLL appraised all of our Finnish and Swedish assets, and CBRE appraised all of our Norwegian assets. And we have reason to be as management positive about the valuation cycle, and currently at least we believe that the trough in valuation also here in the Nordics was reached about the end of last year. And our valuation result, this full external valuation, resulted in a gain of 33.5 million. Some components of the positive valuation were cap rate reduction of approximately 10 basis points in Norway, essentially in all Norwegian properties. And we also feel that appraisers' view on the growth prospects in particularly in the Swedish centres has improved. And also, of course, we have managed ourselves as a company to keep the cash flows at a strong level and improve the valuation also also via that. Our net, our EPRNRV also improved compared to previous quarter, so pretty much driven by the positive valuation, so that was an additional highlight. Then turning over to the debt management, proactive debt management, as the de-risking improving the balance sheet has been one of the top priorities of the management. And we have been extremely active in improving the balance sheet. We issued very successfully the 450 million, a new green bond in April, which was like six times over subscribed. We proactively repaid shortest maturing bonds, i.e. this September 26 bond was tendered back in April immediately. Then the other theme apart from repaying shortest maturing bonds has been to prepay secured debt and thereby also improving our unsecured to secured mix. I will come back to that in a while. And we prepaid 186 million of a secured loan maturing in 29 and 100 million of a secured bank loan maturing in April 27. And then in June conducted a further 100 million tender of a January 27 bond, all serving the same purpose, i.e. de-risking the balance sheet and improving the balance sheet. And this all can be seen here in graphical form, so we have quite modest maturing debt remaining, like this 150 million maturing in 26 and 142 maturing in 27. And in general, our debt structure looks very well laddered now. And additionally, we have a very small pool of secured debt, i.e. approximately 5 percent, and this gives us a very good additional financing opportunities should the bond market, for whatever reason, not work particularly well for the period of time. So we have a very large unencumbered asset pool right now. The key credit metrics can be seen here. Actually, the loan to value improved. Interest cover ratio slightly improved despite the fact that the weighted average interest rate did increase, and that is naturally due to the fact that we have been repaying the old cheap bonds and at the same time improved the balance sheet and de-risked the balance sheet. This is all from me. Back to you, Anni. Thank you.

Thank you, Oleg and Eero, for the presentations. In our audio cast invitation, we presented the opportunity to share questions in advance to our investor-relations email address. Next, I will present the questions to Oleg and Eero, and after these questions, we will open the line for the audience. We received questions around the share buyback and hybrid bond repurchases. First question, will Citicon continue the share buyback program? And the second question, will Citicon consider repurchasing hybrid bonds? Please, Oleg and Eero.

Maybe let me start with the share buyback and then Eero will answer on hybrid bonds. We completed our share buyback program recently with quite a low amount of shares being bought. We do believe that our share price low and we continue to evaluate with our board additional programs from time to time. No decision has been made as of today, but we will continue to discuss it with this board and we will continue to evaluate option is not off the table, what and if and when. As I said, we will continue the discussion and the moment we will reach any decision, of course, we will inform on terms of condition of the new share buyback if this will be decided.

Yes, and we will naturally, we have been very active in balance sheet management and like I said, this has been a top priority by management and of course, we don't comment what exact transactions or activities we will conduct in the future, but I think it's fair to assume that management will continue to have the balance sheet management and that management as a top priority.

Perfect. Thank you for your answers and next we will open the line for questions from the audience.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Vensilef from Kempen. Please go ahead.

Hi, good morning and thank you for taking my questions. First one on the guidance, of course, you do have a very wide guidance. If we look at your APRA EPS of the first half, it's a bit below the lower end. So my question is, are you still confident that you can reach the top end by the end of the year? And second one on the like for like, especially Finland and Estonia is quite strong as you said. Can you share a bit more on the moving parts there?

If I take the guidance first and Oleg takes the second part. So yeah, thank you for the question. Of course, naturally the company thinks that we will be within the guidance and if we would not be within the guidance, we would have changed it or made some other activities. And I think that you are correct in alluding to that based on the first six monthly results, we are not very close to the top end. But we are within the guidance. That is my main message.

Now coming back to the second question, NRI improvement in Finland and Estonia. It resulted from a couple of measures. First of all, there is an indexation. But if you compare it to other territories, indexation was pretty similar in all our segments. A difference in Finland and Estonia, we will be able to increase our rent and to reach positive leasing spreads for some of the tenants and new tenants. And in addition, and this is probably the difference between other territories, we see better results from our cost saving measures. All those factors resulted in a significant growth of .6% in NRIs in the region.

Okay, thank you. Just to follow up on that, if I look at the table you printed on page five, you have income growth of 4.2 million on a net basis, only 0.9 on a gross basis. So this reads as if it's really more an NRI margin improvement. So as you said, cost savings. Are there perhaps any one-offs in there? Because also if you look at your NOI, it's 95. I think that's probably a record for CityCon. So is this a normal NOI margin I should expect going forward?

For this region, for this region, yes. We believe that cost saving measures we implied are sustainable. We don't see any significant one-off there. This being said, part of our cost is, of course, energy cost, which might fluctuate significantly. Putting energy aside, energy cost and energy consumption, we don't see any significant one-off there.

Maybe I can just add that the operational teams have been very active in tendering and we have reached certain cost savings by tendering. But also, of course, the price of electricity and heating and others have been favoring us recently.

Okay, thank you. That's all from my side.

The next question comes from Michael Chakadjian from BNP Paribas. Please go ahead.

I noticed that you moved 67.4 million of assets from the available for sale into basically back into non-current and you only have 13.7 million in the available for sale. Is this an indication that you're moving away from wanting to sell assets? That would be my first question.

No. First of all, we are not moving away from our intention to sell assets. We continue our effort. If we talk about this specific deal, the deal was close to signing, but the potential buyer walked away from the deal at the last moment. Therefore, we removed it from the list. We still have intention to sell. However, IFRS requirements for asset held for sale are quite strict and since the potential buyer walked away, we removed it from the held for sale assets. It's still on a sale asset and our on a sale asset list and our intention is still to sell this and other assets.

Perfect. Very clear. Can I confirm how much shares have you brought back in the entirety of the shared buyback program?

Can you help me with the exact number? It was a 45.6 million program. 700 something. It was around 700,000 shares.

694,000 exactly if I remember. If my memory serves me.

694,000 shares. Okay. Can I ask then, I've seen your press releases from November and I think from a few months ago about your main shareholder pledging a significant number of his shares. I think it's around 60% of his shares and 30% of all of SteadyCon shares as collateral elsewhere. Can you give us any indication on why he's doing that? Are these margin loans and how are those? Basically, I really want to know what's the risk of him wanting to then being forced to sell that significant amount of shares and also given the fact that he is the chairman of your company.

I understand the question, understand the concern. However, let me put it this way, matters in business of our main shareholder. We don't possess this information and we don't actually share information about the business of our main shareholders. It's not shared with us and it's a separately managed company. So, if there are any questions to matters related to the main shareholder, I suggest to address it to the main shareholder through the investment relation. Also, I would like to remind you it's also a public company, so filings and information is available.

Okay. I understand that it's sensitive. My last question is, now that you're at the issuer level, you're thin-junked, do you consider it as an option on the table that you could extend the hybrids because you wouldn't be losing equity credit if you did and it could help with the ICR?

Yeah, just to remind that still as an instrument level, our bonds are trading at a triple B minus. It was a little bit like a surprise to us that there is this opportunity which you referred to, i.e. non-calling could be possible with five years more equity credit. But it is too early to comment whether that would be the avenue that we would be choosing. But we will in due course analyze all options including non-call and a refinance, i.e. exchange. Okay, makes sense.

So just to summarize, extending is an option but not something which you need to think about further into the future. Okay, clear. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments. Thank you everyone for attending

the audio cast and have a good day.