Good morning, everyone, and welcome to Citicom's q one two thousand eighteen results audio cast. Today, we've published our interim report for the January period of 02/2018. The interim report as well as the audio cut presentation are available on our website under investors. My name is Mick Wallam. I'm the head of Investor Relations.
And here with me today, I have our CEO, Marcel Kochel as well as our CFO and Executive Vice President. Marcel Adero will briefly go through the first quarter in terms of operational performance as well as financial figures, after which he will have the chance to ask questions. Marcel, please go ahead.
Yes. Thank you, Mikko. Good morning, everybody. Let's go immediately to the highlights of Q1 twenty eighteen. Well, EPRA earnings per share, $0.04 1.
Well on track, I would say, into account the divestment, substantial divestment of three twenty five million euros last year that impacted EPS and so did FX, the currency. Strict cost management in all levels of the organization, and that resulted in a 10% lower admin expenses compared to 02/2001. Good operational developments. We've seen a positive leasing spread of plus 1.9%, and we call the operational performance in Sweden strong. In Norway, we call it solid, and we've seen a positive development in Finland.
Finland is really picking up. We've seen slight improvement in occupancy rates up to 96.1 and very much driven by Finland. So we feel upbeat about Finland. We've seen flat leasing spreads, improved like for like NRI, tenant sales numbers, footfall. They're all positive.
And extremely positive the outstanding operating performance in ISOOMINA. A very strong footfall and very strong tenant sales also on a like for like basis, and I will get back to that later in the presentation. And then we have further recycled our capital and improved our portfolio quality. We have sold a Cokeramint and shopping center, a smaller shopping center in Stockholm. After some value enhancing investments and actions, we have decided to divest this property, and that was completed.
That transaction was completed in q one above book value. And then we sold after the quarter, by the way, we we have sold Corpio in Finland, one of the last properties out of the so called supermarket and shop portfolio. The guidance for 2018 unchanged, meaning between 15.5 and 17.5¢ per share. Let's go back in time, the next slide. We have been working on a huge transition of our portfolio, and the statement is less is more.
02/2011, we had a portfolio total portfolio of 2 and a half billion. And at that time, we had 78 properties within our portfolio. Today, we have a 4 and a half billion property portfolio with 43 properties. Hence, the average size and quality of the portfolio increased, and that allows us to have a more efficient and more focused operation and organization also. And with the sale of Corpio, we have divested actually almost all non shopping centers that we used to have in our portfolio.
You don't hear?
42 centers 42 properties we used to have in 02/2011. Today, we have only one non shopping center portfolio of shopping center shopping retail property left. So tremendous, improvements if it comes to operations, but also the fundamentally, the property quality portfolio increased. Then the like for like NRI grew by o point 8%, and the overall NRI, GRI ratio also improved up to 87.9. Please bear in mind that the total NRI, or the total like for like NRI is 65% of our total portfolio.
And in Finland, this number is 47, so less than half. And, of course, the reason is Esoomina and Lipoliva. Both centers, specifically Esoomina, is still out of our like for like. As of q two, we're going to present you comparisons on a like for like basis for both for Itauomina. And also bear in mind that the currency had a negative impact on the NRI, 1,800,000.0, and the divestments also had a negative impact of 12.1.
Well, look at Sweden. We talked about strong improvement of NRI 7.6%, Norway 1% and Finland still negative, but the decline was eased by improvement of occupancy and leasing spread. The overall sales, plus 7%. Footfall, plus 8%. And on a like for like basis, I would say stable development.
I would like to ask special attention for the black column on the left hand side, and that indicates the overall growth in the like for like tenant sales, and that's actually driven by ISOOMINA. But apart from that, also in our pure like for like portfolio here in Finland, we've seen a 3% positive. So a number that is clearly more positive than we have ever shown the last three, four years. Estonia, very much driven by extreme competition that came to the market and by roads constructions at Roccalmada, and these road construction will be finished before summer. Outstanding performance is ominous.
I think this is the right statement after the metro opened by the end of last year. Footfall doubled. Footfall doubled. And, actually, we targeted a footfall of 14 up to 15,000,000 this year, but we are expecting a footfall of 17,000,000 or even higher than that. And that indicates a very strong basis for growth as we have seen already.
If you look at the tenant sales, plus 44% and on a like for like basis, plus 13%. And retail occupancy remains at a very high level, of 98%. Overall, the occupancy improved in our portfolio slightly. Ninety six one percent is the number right now, but special attention for the leasing spread. A clear improvement here.
Positive over q one two thousand and eighteen. And in Finland, the leasing spread was stable actually for the first time since 02/2014. And it might be early days to forecast for the full year, but we feel upbeat and we are very pleased with the development during this quarter. We see encouraging signs in Finland due to the positive economic environment, but also due to the improved property fundamentals in our portfolio. Look at occupancy, o point 6% increase.
Average rent, nice growth. And if you look at the NRI, I think it's fair to say that we have seen the bottom and that we can go north. Would like to summarize and then hand over to Eero. Good operational development. Also in Finland showing improvements actually in all operating KPIs.
And then lower NRI and EPRA earnings, but very much impacted by the divestments in 2017, divestment of €325,000,000 and the guidance we keep unchanged.
Thank you, Marcel. I will continue from page 30, I. E, q one financials. As you can see and as was mentioned already by Marcel, our net rental income was down by 5.8% at and ended at €53,300,000. Actually, more than half of this reduction was due to the currencies and the impact of lower weaker Norwegian kroner SEK Swedish kroner was 1,800,000.0.
So basically, on the basis of same FX rates, our net rental income for the quarter would correspond to something like EUR 55,100,000.0, which was a good achievement taking into the account that we improved the quality of our portfolio by selling about EUR $325,000,000 of non core properties. Due to the fact that this is a Q1, we will not in a great detail go through the income statement. You can find that in the appendix on Page 26. I will just note a few highlights from there. You will be able to see that the credit losses were again very modest and actually reduced over previous year, especially in Finland, the development was good.
We also had gained some sale for the quarter. So this is, of course, a question we receive often. So are you forced to sell at a discount? So at least in this case, not so permanent disposal took place at the gain, and this gain of 3,000,000 is booked in q one numbers. Also, the admin costs developed very positively, I.
E, about 10 lower admin costs at €600,000 less. Also, a lower financing costs by €1,000,000 So this will partly compensate for the slightly lower net rental income. And as a result, EPRA earnings were $36,000,000 and EPRA EPS $0.00 $41 And again, basically reflecting a stable FX rate, our April EPS would have been very close to $0.43 which was the EPS one year ago during the first quarter, which again is a good achievement. Then turning over to Page 14, I. E, the net rental income bridge.
Here, you can see the components. And as mentioned already, disposals have reduced the net rental income by 4,100,000.0, I. E, this was the impact of selling the portfolio of weak non core assets. Whilst the redevelopment projects is Armenia in particular increased net rental income by €1,400,000 and acquisitions, the one transaction that we had basically increased by EUR 1,000,000. And like mentioned, net rental FX and also slight EBIT other impacts other items impacted net rental income by EUR €1,900,000 So this is the full net rental income bridge.
We had a particularly the impact of particularly weak Swedish krona and Norwegian krona and the next page includes all the details thereof. And the executive summary is that compared to Q1 twenty seventeen, the impact on net rental income level was EUR 1,800,000.0, less the net rental income in 2018 as a result. And on EPS, a per EPS basis like 0.17% on quarterly per EPS compared to compared to previous year. We had a fairly stable translation result over the over the quarter. So in the other comprehensive income, there's only 400,000 change.
Then fair values and fair values in in Finland, there was a loss of 13,600,000.0 recorded in in Norway, 3.7 and Sweden's plus Denmark, a strong gain of €12,880,000 Estonia slight reduction, 3,500,000.0.
So
overall, 7,900,000.0 negative result. And of course, in Finland, the situation still did reflect the more difficult competition situation outside outside Helsinki and development in in a few non core properties. So otherwise, are you development also in Finland was quite quite stable. And that and in Norway, the slight reduction reflects the the wider slightly wider yields and and slightly lower market trends in non Oslo properties, but also there the development was quite quite stable. And in Sweden, the strong leasing and and the strong markets in general continue to produce gains in fair values.
NAV, net EPRA net asset values remained actually exactly stable, so same 2.71% as at year end. And here, you can see the bridge where the like mentioned, the changes were very minor. We had positive impact from earnings. We had a slightly negative impact from indirect result, I. E, fair values and deferred taxes, but otherwise pretty stable.
Triple net NAV came up slightly mainly due to the slight positive revaluation of our the value of interest rate swaps and and currency swaps. Then moving over to the LTV and also LTV remained very stable over the quarter, 10 basis points up, I. E, 46.8%. And this does not yet include the impact of corpio, which was showed after the period, but does impact or does include the impact of okay mental okay mental disposal. Of course, also here, the negative FX rates do have an impact and the company still remains committed to the 40% to 45% loan to value, and we intend to bring it back to this level.
Then turning over to the guidance. The guidance, we are in in line with our our previous guidance. And now, of course, now when a couple of properties have been either already sold or we have agreed the sale, we have included the impact of of those in our in our guidance. And of course, we have updated the most recent FX rates, but still we are within nicely within the guidance and did not specify the guidance and that follows our previous practice. Also last year, we narrowed the guidance and specified the guidance only at at q two, and this is the same same thing that we intend to do do this year as well.
And this was all from me. Back to you, Marcel.
Yeah. Thanks, Sugo. Hiro. Looking forward, looking ahead, the success of ISA OMINA really encourages us to further recycle the capital and to reinvest the proceeds in high quality assets in urban environments and to develop them. I've been in in Goteborg this week, and the mall is about to open in September.
It will be a modern mall in the heart of a growing city center in Moldow, Gutteburg. Outstanding connectivity with direct and indirect catchment and great architecture, state of the art interior design, and tenant mix. Lipoliva, we have almost completed now demolition, and we are in the excavation of in in the phase of excavation of the land. The leasing is at a solid level already of 60% even before starting the construction. Some words about Shista.
We are in the stage of repositioning and recaniting, and we want to to add grocery offer to the center, make it more daily, add more services, food and beverage as we did already over the last couple of years, and, we will continue that track. We will make use of the momentum, and, we will upgrade the look and feel of the center, call it a facelift. So we're going to make the center up to date so it's well prepared to cater the daily needs for workers, for the residents in this fast growing area around the center. And, of course, it comes with the pain. In 02/1819, we're going to touch more than 20% of the GLA, and therefore, we have taken it already out of the like for like before.
The total investment is, let's say, 25,000,000 and Citicom's part is half of it. The CISA case really shows that we are preparing our centers for a future in which the center is more online resilient, and our mission is to provide urban convenience in the heart of communities. So mixed use community malls with commerce, retail, combined with services. And today, 55% of our income is already online resilient. And by proactive leasing, we aim to increase this number by another 10% going forward.
And here, I think, Citicom has something special in our business model, daily convenience, lots of nonretail, daily services, that help people to organize their daily lives and daily routines. Strategic focus areas for 02/2018, further capital recycling. For the coming years, we intend to divest another five to 10% of the portfolio, and we will use the money for leverage reduction and to invest in core asset developments or investments. And then operational excellence, focus on online resilience is core of our strategy and of course, maintain strict cost management as we have shown in Q1. And last but not least, I want to repeat that, get the loan to value below 45%.
Having said that all, I would like to hand over to Nico.
Thank you for the presentation, Eira and Marcel. Now we have good time for questions, so I would like to turn to the audio line for questions from the audience.
Thank you. Our first question comes from Robin Nyberg of Carnegie. Please go ahead. Your line is open.
Hello, guys. I have two questions. First of all, regarding the Lipoliva project, when do you expect to start the development of the project? And then could you also comment on why it has been postponed here a couple of times? That's the first one.
Okay. I'm not aware of the fact that we have postponed it, to be honest. The we intend to to start the construction in September, October, and that is according to plan. So I do not know why you talk about the delay.
Yeah. The reason is that I'm look looking at comments, and it was supposed to start. Okay. Already or no, but but that's that's clear.
Yeah. Yeah. Okay. Nothing to do without internal planning, so it's more technical to it. And I cannot comment to Leto's, communication.
We are on track.
Sure. Okay. Thank you. And, also, could you briefly go through the supply demand situation per country? I think earlier, you have said that you have had some headwinds in Baltics and Finland, but are those headwinds starting to ease as demand seems to be picking up?
Well, definitely in Finland, if you look at footfall in sales, we show positive numbers. And I'm really very happy because even without Esoomina, we can show those numbers. And as you, know, we have shown quarter after quarter, unfortunately, negative numbers. So certainly, these positive numbers are leading indicators for higher and for for for growth in NRI going forward. So that's Finland.
You talked about Baltics. Baltics, very competitive environment. New shopping centers, large shopping centers came to the market. We have great locations. We have great assets.
In Christina, we are we have started already a refurbishment and upgrade, also driven by retenanting, and that impacts the numbers. And we also have similar plans for Roccalmada going forward. And as I already shared with you, Roccalmada also suffers right now temporarily from road construction works that are help that is hampering the the accessibility of the center. But that will come to an end soon.
All right. Thank you very much.
Thank you. Our next question comes from Erik Salts of JPMorgan. Please go ahead. Your line is open.
Yes. Thank you and good morning. Two questions maybe from my side. First of all, can you tell us a little bit about where the investment demand for the centers that you have sold recently is coming from?
Well, the local heroes for the 20 let's say, the 20 to 30,000,000 shopping centers, the local shopping centers tend to be bought by local or regional investors. If you look at larger centers, we talk about in our funds, most of them regional funds. And as we have shown last year, we have sold, a 165,000,000 property portfolio in Finland scattered all over the place, to servers, so international more opportunistic driven investors.
I understand. That's true.
Three four, the other buyer was a was a real estate fund established by institutional Finnish Finnish money, so local real estate fund.
Okay. Okay. That's clear. Thank you. Maybe some of the next question is maybe partly been answered.
But if you look at the positive things that you see in Finland, is that especially in Helsinki or also outside of Helsinki?
Well, I might recall that, our Finnish portfolio consists of, is the largest Mhmm. Center by far in the portfolio, but not yet in like for like. LipoLife out of like for like. So the like for like numbers that we presented today are very much driven by the non Helsinki shopping centers. So you see a growth there.
I think that's that's answering your question. We see growth all over the place, more positive numbers. And if you add the positive, the extreme positive, performance of EsoOmni now, I think we can feel upbeat about the Finnish performance going forward.
All right. Excellent. Thank you. Thank you very much.
Thank you. Once again, if there are any further questions, please dial 01 on your telephone keypads now. As I said, there is one further question coming through. That's from Tobias Kye of ABG. I
have a question regarding the Istou Omanas center and if there are still any big or any major discounts for tenants or if the income we see now is the long term income, let's say.
We don't see lots of discounts. I mean, when you lease a shopping center, many times you have step up rents. And if the center performs well, you see growth. And this is definitely the case in this all manner. So let's not talk about discounts here.
But should we expect that the income in the next few quarters will increase from Isom now? Or do we already see those higher levels?
Yes.
Okay. Thank you. And one more question. Can I just ask how you define online resilient parts of of the shopping centers?
Well, fashion by definition, is, quite sensitive, quite vulnerable if you, if you think about online. The same for shoes and these kind of categories. And our portfolio is very much based on daily convenience. So we have 17% of our income driven by groceries. Now I won't say that groceries are not bought online at all.
But if you look at the numbers of the grocery companies, they talk about 3% of the total sales by driven by online. That's a low number, and that's what we call resilient. If you look at services and offices if we talk about offices, we talk about health care. We have a lot of health care in our centers. Actually, it's one of our core focus areas for our leasing teams.
It's a new category. It's even a new competence that we have developed in our organization. I think we are ahead of the crowd. So lots of health care, lots of municipality services we add to our shopping centers. Cafes and restaurants, you cannot drink a cup of coffee online.
Here in East Olmina, if I might use East Olmina again as an example, we have 25% of our the number of shops, number of premises in cafes and restaurants, food and beverage, and entertainment. That is what we call online resilient, the same with wellness, gyms. So it's, it's a definition, based on logic, based on experience, and based on, the way customer behave.
There seems to be no further questions at this time. So I'll hand back to our speakers for the closing comments.
Thank you. As said, there seems to
be no further questions, so we would like to thank everyone for participating as well as for the good questions. But should you have any questions after this audio cast, please feel free to be in touch with me or Eric or Marcel. We wish you all a very nice rest of the week. Thank you.