Some highlights: turnover totalled 42.5 million (42.2 million), profit before taxes amounted to 17.2 million (14.6 million), including 5.7 million of one-time financing costs, earnings per share were 0.11 (0.14 including 0.025 one time deferred tax receivable).
Citycon and IFRS
Citycon Oyj has changed its reporting practice in accordance with IAS/IFRS standards (International Financial Reporting Standards); this affects its interim reports and financial statements for 2005.
Strong demand continued for retail premises in Finland in the second quarter of the year, and occupancy rates remained strong. Retail sales continued to grow 2005 even though consumer confidence in economic development has weakened. The low interest rate and inflation have contributed also to this retail sales trend. International investors' interest in the Finnish property market remained high, with most new property transactions involving foreign operators. International interest is also estimated to reflect in the yield and price levels of the most sought-after properties.
Business Activities and Property Portfolio Summary
Citycon's business activities comprise the entire chain of retail premises ownership, i.e. ownership, leasing, management and development of properties. Citycon operates in three divisions (business segments): Shopping Centers, Supermarkets and Shops,
and Property Development. At the end of the reporting period, Citycon owned 143 properties (146) with a fair value totalling 754.7 million (737.5 million).
Practically all the company's property portfolio consists of retail premises. In the reporting period, the company owned 16 shopping centers and 127 supermarkets and shops. Shopping centers accounted for 60.9% and supermarket and shop premises for 39.1% of the property portfolio's fair value.
In terms of fair values, 43.5% of the properties were located in the Helsinki Metropolitan Area, 38.8% in other major Finnish cities and 17.7% in other parts of Finland at the end of the period.
Changes in Property Portfolio Fair Value
In the valuation of investment properties according to IAS 40, Citycon has decided to use the fair value model, which will result in changes in value being posted to the income statement. The valuation of investment properties is assessed in accordance with International Valuation Standards (IVS) at least once a year by an external valuation professional.
The fair value of Citycon's property portfolio increased in the period under review, due to changes in market trends and leasing operations amounting to an increase of 7.8 million, i.e. approximately 1.0%. The most significant change in the market was the rising international interest in the Finnish property market, and particularly in retail premises. Increasing demand lowers the yield requirements of investors and creates pressure for increasing property prices, particularly in the liveliest growth centers.
Shopping Centers Division
During the period, the Shopping Centers division acquired Kiinteistö Oy Karjalan Kauppakeskus in Lappeenranta for 7.9 million, whereby Citycon became the main owner of retail premises of the IsoKristiina shopping center.
Citycon also signed a contract to acquire a 75% holding in the Åkersberga shopping center in Sweden. The deal was concluded on 1 July 2005. This is Citycon's first international property investment, with the total investment amounting to approximately SEK 900950 million (95100 million) after completion of the expansion projects still to be launched. The Åkersberga investment is not included in the figures for the period under review. The period's investment decisions will both contribute to Citycon's growth strategy in Finland and its target to actively develop international business.
Supermarkets and Shops Division
The Supermarkets and Shops division decided to construct a new shopping center in Hervanta, Tampere, with the total investment estimated to amount to 25.3 million, and net yield, afte