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Citycon H1/2023: Compounding operational growth

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CITYCON OYJ Half-Year Financial Report 18 July 2023 at 20:30 hrs

HELSINKI, July 18, 2023 /PRNewswire/ — CITYCON Q1-Q2/2023 RESULTS SUMMARY:

FINANCIAL & KEY PERFORMANCE INDICATORS

Like-for-Like (‘LFL’) Net Rental Income
Excludes acquisitions, dispositions, development, and closed asset (Torvbyen)

  • Q1-Q2/2023, increased 6.9% (comparable FX) vs. Q1-Q2/2022
    • Q2/2023, increased 4.5% (comparable FX) vs. Q2/2022

Q2/2022 was positively impacted by several one-time benefits resulting in difficult Q2/2023 comparisons. Excl. these one-time items:

  • Q1-Q2/2023, increased 7.8% (comparable FX) vs. Q1-Q2/2022
    • Q2/2023, increased 7.5% (comparable FX) vs. Q2/2022
    • Q2/2023 compounding growth achieved versus last year as Q2/2022 LFL NRI growth was 9.1% vs. Q2/2021.

Standing Net Rental Income
Excl. four assets disposed in Norway in 2022

  • Q1-Q2/2023, increased 5.5% (comparable FX) vs. Q1-Q2/2022
    • Q2/2023, increased 2.6% (comparable FX) vs. Q2/2022

In addition, Q1-Q2/2023 was further impacted by the closing of Torvbyen in Norway.  Excl. the adverse impact of these two combined items:

  • Q1-Q2/2023, increased 7.9% (comparable FX) vs. Q1-Q2/2022
    • Q2/2023, increased 7.2% (comparable FX) vs. Q2/2022

All Net Rental Income

  • FX-rate impact to total NRI was EUR -5.8 million in Q1-Q2/2023
  • On a sequential basis, Q2/2023 NRI grew 2% over Q1/2023

KPI’s

  • Q1-Q2/2023 LFL tenant sales +4.1%
    • +9.7% vs. Q1-Q2/2019 (pre-pandemic)
  • Q1-Q2/2023 LFL footfall +3.1%
  • Q2/2023 retail occupancy 95.5%
    • +10 bps vs. Q1/2023
    • +50 bps increase from Q2/2022
  • Q2/2023 collections were 97%
    • Q1/2023 improved to 99% from 97%
  • Q1-Q2/2023 average rent per sqm increased EUR 1.5 (+6.8%) to EUR 24.0 (comparable FX)
  • Q2/2023 9.4% LFL occupancy cost ratio

BALANCE SHEET

Liability Management

  • Replacement and extension of EUR 650 million credit facility in April 2023, incl. EUR 250 million term loan
  • Q2/2023 Tendered EUR 138 million of 2024 senior bonds (notional)
  • Q2/2023 Purchased additional EUR 15.7 million of notional bonds in open market
    • Q1-Q2/2023 total notional bond and hybrid repurchases of EUR 235 million for EUR 211 million cash

Fair Value

  • Q1-Q2/2023 net fair value improved EUR 69.4 million
    • Q2/2023 net fair value improved EUR 24.7 million

SUSTAINABILITY

  • 3rd consecutive year as Financial Times European Climate Leader
    • Only Finnish real estate company included on the list; top third of all European companies regardless of sector.
  • Recently updated sustainability strategy
    • Setting ambitious goals for 2030

STANDING PORTFOLIO KEY FIGURES 1)

Q2/2023

Q2/2022

%

FX Adjusted
Q2/2022

FX Adjusted % 4)

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Net rental income

MEUR

48.9

51.0

-4.1 %

47.7

2.6 %

Direct operating profit 2)

MEUR

42.2

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44.6

-5.3 %

41.5

1.6 %

EPRA based key figures 2)

EPRA Earnings

MEUR

26.6

30.4

-12.5 %

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28.3

-6.0 %

Adjusted EPRA Earnings 3)

MEUR

19.5

22.8

-14.6 %

20.7

-6.0 %

EPRA Earnings per share (basic)

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EUR

0.159

0.181

-12.5 %

0.169

-6.0 %

Adjusted EPRA Earnings per share (basic) 3)

EUR

0.116

0.136

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-14.6 %

0.123

-6.0 %

Q1-Q2
/2023

Q1-Q2/
2022

%

FX Adjusted
Q1-Q2/2022

FX Adjusted % 4)

Q1-Q4/2022

Net rental income

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MEUR

96.8

97.0

-0.3 %

91.7

5.5 %

195.1

Direct operating profit  2)

MEUR

80.5

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81.9

-1.7 %

77.2

4.3 %

166.2

EPRA based key figures 2)

EPRA Earnings

MEUR

51.9

55.7

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-6.8 %

52.3

-0.7 %

113.6

Adjusted EPRA Earnings 3)

MEUR

37.4

40.6

-8.0 %

37.2

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0.5 %

83.1

EPRA Earnings per share (basic)

EUR

0.309

0.332

-6.8 %

0.311

-0.7 %

0.676

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Adjusted EPRA Earnings per share (basic) 3)

EUR

0.222

0.242

-8.0 %

0.221

0.5 %

0.495

1)Standing portfolio key figures include only income and expenses from investment properties that were on group balance sheet on 30 June 2023. The portfolio is the same in the reporting period and in the comparison period, hence the numbers are comparable. Lippulaiva (opened on the 31st of March 2022) is included in the standing portfolio.
2) Citycon presents alternative performance measures according to the European Securities and Markets Authority (ESMA) guidelines. More information is presented in Basis of Preparation and Accounting Policies in the notes to the accounts.
3) The key figure includes hybrid bond coupons and amortized fees.
4) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.

 

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KEY FIGURES

Citycon Group 1)

Q2/2023

Q2/2022

%

FX Adjusted
Q2/2022

FX Adjusted % 2)

Net rental income

MEUR

48.9

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52.8

-7.3 %

49.2

-0.6 %

Like-for-like net rental income development

%

4.5 %

9.1 %

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Direct operating profit  3)

MEUR

42.2

46.3

-8.9 %

43.0

-2.0 %

IFRS Earnings per share (basic) 4)

EUR

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0.18

0.13

41.2 %

0.11

56.0 %

Fair value of investment properties

MEUR

3 979.0

4 216.9

-5.6 %

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Loan to Value (LTV) 3) 6)

%

43.0

40.8

5.4 %

EPRA based key figures 3)

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EPRA Earnings

MEUR

26.6

32.2

-17.4 %

29.8

-10.9 %

Adjusted EPRA Earnings 5)

MEUR

19.4

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24.6

-20.8 %

22.2

-12.5 %

EPRA Earnings per share (basic)

EUR

0.158

0.192

-17.4 %

0.178

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-10.9 %

Adjusted EPRA Earnings per share (basic) 5)

EUR

0.116

0.146

-20.8 %

0.132

-12.5 %

EPRA NRV per share 7)

EUR

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10.71

11.87

-9.8 %

 

Q1-Q2
/2023

Q1-Q2
/2022

%

FX Adjusted
Q1-Q2/2022

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FX Adjusted % 2)

Q1-Q4/2022

Net rental income

MEUR

96.7

101.8

-5.0 %

96.0

0.8 %

203.6

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Like-for-like net rental income development

%

6.9 %

6.1 %

6.6 %

Direct operating profit  3)

MEUR

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80.4

86.4

-7.0 %

81.3

-1.0 %

175.2

IFRS Earnings per share (basic) 4)

EUR

0.50

0.26

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91.5 %

0.24

-0.15

Fair value of investment properties

MEUR

3 979.0

4 216.9

-5.6 %

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4 040.1

Loan to Value (LTV) 3) 6)

%

43.0

40.8

5.4 %

41.4

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EPRA based key figures 3)

EPRA Earnings

MEUR

51.9

60.3

-14.0 %

56.4

-8.0 %

122.6

Adjusted EPRA Earnings 5)

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MEUR

37.3

45.2

-17.4 %

41.3

-9.6 %

92.1

EPRA Earnings per share (basic)

EUR

0.309

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0.359

-14.0 %

0.336

-8.0 %

0.730

Adjusted EPRA Earnings per share (basic) 5)

EUR

0.222

0.269

-17.4 %

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0.246

-9.6 %

0.548

EPRA NRV per share 7)

EUR

10.71

11.87

-9.8 %

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11.01

1)The numbers include the sale of four investments properties during the last year
2) Change from previous year (comparable exchange rates). Change-% is calculated from exact figures.
3) Citycon presents alternative performance measures according to the European Securities and Markets Authority (ESMA) guidelines. More information is presented in Basis of Preparation and Accounting Policies in the notes to the accounts.
4) The key figure includes hybrid bond coupons, amortized fees and gains and expenses on hybrid bond repayments.
5) The key figure includes hybrid bond coupons and amortized fees.
6) Highly liquid cash investments has been taken into account in net debt.
7) The effect of currency rates to EPRA NRV/share was EUR -0.58.

 

CEO F. SCOTT BALL:

We continue to see strong performance in our business fundamentals in the first half of the year as like-for-like tenant sales were 4.1% above Q1-Q2/2022 and 9.7% above Q1-Q2/2019 pre-pandemic levels. We also are seeing more customers in our centres as like-for-like footfall increased 3.1% compared to the previous year.  Retail occupancy is now at 95.5%, up 50 bps versus the same quarter last year. At the same time, average rent per square meter, with comparable FX rates, increased by 1.5 EUR/s.qm. (6.8% to 24.0 EUR per sq.m.) during the first half the year. We continue to benefit from a low occupancy cost ratio of 9.4%, which together with increasing tenant sales and improving footfall, positions Citycon for continued compounding rent growth and service charge increases. Sales increases keeping pace with inflation were evident in our continued high collection rates of 97% in Q2/2023, with Q1/2023 collection improving to 99%. In the first half of the year, these metrics supported our underlying asset values where we recorded a net fair value gain of EUR 69.4 million for Q1-Q2/2023, reflecting the impact of compounding rent growth due to indexation linked leases (93% of our leases).

The net effect of these strong KPI’s is that like-for-like net rental income grew nearly 8%, when excluding one-time items. On a sequential basis, Q2/2023 net rental income grew 2% over Q1/2023 net rental income. In the first half of this year there has been adverse volatility of currencies (which is outside of our control), specifically the NOK and SEK are at twenty-year lows. Each quarter we translate these currencies back to the euro for reporting purposes. These currencies will likely rebound at some point, at which time we will benefit. More details on the impact of currency through H1/2023 are included within the report. 

There are several factors which explain these results: our terrific assets, our strong local teams, the strength of our markets throughout the Nordics and continued strength of consumers, as evidenced by the high level of foot traffic in our assets and the corresponding sales being reported by our tenants. This is due, in part, to our business model, which focuses on necessity-based retail and essential services addressing the every-day-needs of our communities. This type of retail promotes daily traffic to our properties, which is only enhanced by locations in central urban areas adjacent to public rail/bus transportation hubs. Another driver of the consumer strength phenomenon is the average wage growth (5.5%) that has occurred in our markets due to inflation. As is typical in an inflationary environment, price increases work though the entire chain: wages, cost of goods/services, higher sales, and ultimately, for Citycon, higher rents.

As noted in our Q1/2023 Interim Report, we refinanced and expanded our credit facility in April from EUR 500 million to EUR 650 million, consisting of a EUR 400 million revolver and EUR 250 million term loan. Following this refinancing, our team continued their disciplined capital allocation by using the proceeds to execute a EUR 138 million tender for our bonds maturing in 2024, taking advantage of large discounts and dislocation in secondary trading. In addition to the tender, we continued repurchasing bonds (EUR 15.7 million) in the open market at a significant discount during the second quarter and will continue to act opportunistically to repurchase debt. Through these actions, we continue to mitigate the earnings impact of higher current market interest rates, while also improving our overall balance sheet. In addition to the new credit facility and term loan, we have disposed of EUR 266 million of non-core assets at approx. book value over the past 20 months, including EUR 120 million in December 2022, which is part of our planned EUR 500 million asset sale target.  With the additional flexibility of the new credit facility, we can be patient as Nordic transaction markets stabilize and we continue our asset management initiations to maximize values for further sales transactions.  Given the reports of significant amounts of investment capital waiting to be invested, we remain confident that we will meet our previously disclosed divestment target by the end of 2024.

As mentioned, the tenant mix of Citycon’s assets, which consists of municipal and grocery tenants, anchored by public transportation with indexation linked leases, sets us apart from our peer group.  This long-stated strategy has already demonstrated its strength and resilience throughout a variety of market conditions, which we continue to improve upon. The most recent example of our active asset management is Myyrmanni centre in Finland, where we have further improved the tenant mix to increase the share of necessity-based tenants by signing several new leases including a new Lidl grocer and a 7,300 sq.m. Prisma hypermarket resulting in groceries representing over 50% of the total GLA when reopening this fall. This is consistent with what we have achieved in many of our properties including Columbus (which we sold in 2021) and will continue to accomplish across the portfolio. These actions not only provide stability to revenue growth, it has the added benefit of improving the average credit profile of our tenant base. These asset management decisions remain aligned with, but separate from, the zoning work we are doing to achieve substantial additional building rights across the portfolio.

Our business is really not that complicated. We own quality real estate, provide the consumer the goods and services they require, and provide an environment that is convenient to access. When you layer in the dramatic impact of compounding rent growth, you have the recipe for success. The bottom line is that our business fundamentals are strong, and our assets continue to perform very well. There is a scarcity of the type of high-quality retail assets we own, we have a proven business model and all of the important metrics (sales, footfall, rents, occupancy, collections) continue to show sustained growth. For all these reasons we remain bullish on the prospects of the business moving forward.

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FX impact on LTV, NRV and IFRS equity

Actual FX-rates Q2/2023

14.7.2023 FX-rates

31.12.2022 FX-rates

31.12.2021 FX-rates

LTV (%)

43.0 %

42.6 %

42.0 %

41.1 %

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EPRA NRV per share

10.71

10.93

11.29

11.60

Equity increase compared to Q2 actual (MEUR)

32.4

86.2

131.9

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OUTLOOK FOR THE YEAR 2023 – reaffirmed with additional FX details

Outlook for 2023 with year-end 2022 FX rates

Potential FY2023 negative FX impact

Direct operating profit

MEUR

174–192

-10

EPRA Earnings per share (basic)

EUR

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0.69–0.81

-0.08

Adjusted EPRA Earnings per share (basic)

EUR

0.51–0.63

-0.08

 

The outlook assumes that there are no major changes in macroeconomic factors and that there will not be another wave of COVID-19 with restrictions resulting in significant store closures and no major disruptions from the war in Ukraine. These estimates are based on the existing property portfolio as well as year-end 2022 estimates of inflation, EUR–SEK and EUR–NOK exchange rates, and interest rates.

Given exchange rates have recently been subject to extraordinary volatility, estimated FX impact for the full year 2023 is provided as an additional information for further transparency and clarification. Potential negative FX impact for FY2023 is based on the assumption that EUR–SEK and EUR–NOK exchange rates stay at the level of 14 July 2023.

AUDIOCAST

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Citycon’s investor, analyst and press conference call and live audiocasting will be held on Wednesday, 19 July 2023 at 10 am EEST. The audiocast can be participated by calling in and following live at this  website: https://citycon.videosync.fi/q2-2023

Questions for the management can be presented by phone. To ask questions, join the teleconference by registering on the following link: http://palvelu.flik.fi/teleconference/?id=10010528 

After the registration you will be provided with phone numbers and a conference ID to access the conference. To ask a question, press *5 on your telephone keypad to enter the queue.

The audiocast will be recorded and it will be available afterwards on Citycon’s website.

CITYCON OYJ

For further information, please contact:
Bret McLeod
Chief Financial Officer
Tel. +46 73 326 8455
[email protected]

Sakari Järvelä
VP, Corporate Finance and Investor Relations
Telephone +358 50 387 8180
[email protected]

Citycon is a leading owner, manager and developer of mixed-use real estate featuring modern, necessity-based retail with residential, office and municipal service spaces that enhance the communities in which they operate. Citycon is committed to sustainable property management in the Nordic region with assets that total approximately EUR 4.2 billion. Our centres are located in urban hubs in the heart of vibrant communities with direct connections to public transport and anchored by grocery, healthcare and other services that cater to the everyday needs of customers.

Citycon has investment-grade credit rating from Standard & Poor’s (BBB-). Citycon’s shares are listed on Nasdaq Helsinki Ltd.
www.citycon.com

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Ultima Markets Wins Two Prestigious Awards at Global Forex Awards–Retail 2024!

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LIMASSOL, Cyprus, Sept. 20, 2024 /PRNewswire/ — Ultima Markets, a leading global forex and CFDs brokerage, is thrilled to announce its double success at the prestigious Global Forex Awards – Retail 2024. The company won two distinguished awards: “Best Affiliates Brokerage – Global” and “Best Fund Safety – Global.”

The awards were presented during the event in Limassol, Cyprus, where Jean Philippe, Board Advisor, Corporate Governance and Sustainability at Ultima Markets, accepted the honours.

The Global Forex Awards – Retail has celebrated excellence in trading innovation for seven consecutive years. Ultima Markets’ dual wins reflect its commitment to quality, client-centric strategies, and strong partnerships across the financial services sector.

The “Best Affiliates Brokerage—Global” award recognises Ultima Markets’ exemplary affiliate programme, which has successfully driven its global expansion. It is celebrated for its transparency and competitive rewards tailored to affiliate needs.

Receiving the “Best Fund Safety – Global” award highlights Ultima Markets’ efforts to safeguard client assets. Through its partnership with Willis Towers Watson, the company provides up to USD$1,000,000 in insurance per account, while its Financial Commission membership ensures clients access to up to €20,000 in compensation funds.

These recognitions underscore Ultima Markets’ priority to security and transparency, including segregated accounts and robust risk management practices. The broker also assures affiliate partners of exceptional standards.

Commenting on the awards, Jean Philippe said, “These recognitions reflect the exceptional work of our teams to ensure the safety of traders’ funds and our dedication to creating value for our partners and clients. We will continue to evolve and innovate to meet the market’s demands.”

Ultima Markets is renowned for its extensive range of trading products and personalised customer service, designed to meet clients’ diverse needs worldwide. The dual recognition marks a significant milestone in the company’s global growth and reaffirms its reputation for delivering fund safety and robust affiliate opportunities.

“We are delighted to be recognised with these awards, which reflect our mission to create a secure trading environment and build strong, rewarding partnerships,” said Jack Li, Ultima Markets’ Regional Business Director.

About Ultima Markets

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EQT to acquire Indostar Home Finance, an Indian affordable housing finance company, for INR 17.5 billion (USD 210 million) and invest INR 5 billion to support further growth

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STOCKHOLM, Sept. 19, 2024 /PRNewswire/ — 

  • Indostar Home Finance is a fast-growing affordable housing finance company with INR 24 billion (USD 286 million) in assets under management, that has supported over 39,000 low income homeowners and small businesses
  • India’s INR 30 trillion housing finance market presents a multi-decade growth story driven by strong government support, rising affordability and urbanization
  • EQT will invest INR 5 billion in primary capital to support Indostar Home’s continued growth, including by broadening its footprint across India and investing in digital capabilities

EQT is pleased to announce that the BPEA Mid-Market Growth Partnership (or “the MMG fund”) has agreed to acquire a 100% stake in Indostar Home Finance (or “the Company”), a wholly owned subsidiary of Indostar Capital Finance Limited, for INR 17.5 billion (USD 210 million).

Founded in 2017, Indostar Home Finance provides affordable mortgages to retail customers in tier 2 to tier 4 cities in India and has supported over 39,000 low income homeowners and small businesses. The Company has rapidly scaled to more than INR 24 billion in assets under management, achieving a 32 percent compounded annual growth in the last three years. Indostar Home Finance has a network of more than 130 branches spread across nine states and employs over 1,000 people.

The Indian housing finance market currently stands at more than INR 30 trillion, according to the CRISIL. The segment has recorded strong growth driven by government support, rising affordability, and urbanization. However, there remains a significant shortage of housing in the country, with India’s mortgage to GDP ratio at 12.3% compared to more than 60% for developed countries like the USA and UK.

The MMG fund will invest INR 5 billion of primary capital in Indostar Home Finance to support its next phase of growth. EQT aims to expand the Company’s geographic footprint and accelerate its digital transformation journey by leveraging EQT’s in-house digitalization expertise, network of seasoned industry advisors, and expertise in go-to-market strategies.

Ashish Agrawal, Partner in the EQT Private Capital Asia advisory team, said: “Retail lending is a key investment theme for EQT within financial services in India. Building on our investment in the education finance sector through HDFC Credila last year, we are thrilled to welcome Indostar Home Finance to our portfolio. India’s affordable housing finance sector represents a long-term growth opportunity supported by secular demand drivers, favorable government policies and resilient asset quality across economic cycles”

Hemant Sharma, Managing Director in the EQT Private Capital Asia advisory team, said: “Indostar Home Finance has established itself as a leading player in this segment and is well-positioned for continued growth. We are impressed by its market-leading position in South India and strong underwriting capabilities. We see significant potential to expand Indostar’s presence across India and drive its digital transformation. EQT looks forward to supporting the company in its next phase of growth.”

Mr. Shreejit Menon, CEO of Indostar Home Finance, said: “This transaction marks a key milestone for Indostar Home Finance. We are excited to embark on this new journey with EQT, who shares our vision and whose partnership will significantly help advance our mission of delivering affordable housing finance solutions across India. With EQT’s support and global expertise, we are well-positioned for accelerated growth and success.”

The transaction is subject to customary regulatory approvals.

Contact
EQT Press Office, [email protected] 

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WorldSkills Lyon 2024: Talented Winners, Long-lasting Legacy

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LYON, France, Sept. 19, 2024 /PRNewswire/ — After an intense week of competition, the 47th WorldSkills Competition has officially wrapped up, marking the end of a thrilling journey for 1,400 young professionals from around the globe. For four days, participants representing nearly 70 countries and regions competed fiercely in 59 diverse skill areas, transforming Lyon’s Eurexpo into a vibrant hub of craftsmanship and international talent.

From day one, the atmosphere was charged with energy as competitors showcased their expertise in sectors ranging from Manufacturing and Engineering to Fashion, Digital Technology, and Healthcare. The level of dedication and precision demonstrated throughout the week was a testament to the profound commitment these young professionals have to their trades, as well as their determination to showcase their nation’s worth on the global stage.

Last night, the closing ceremony of WorldSkills Lyon 2024, held at Groupama Stadium, brought the event to an emotional close with the announcement of medalists in each skill category. Four medals were awarded in each skill: Gold Medal, Silver Medal, Bronze Medal, and the Medallion for Excellence. This ceremony underscored the core belief of the WorldSkills movement: excellence is found in diversity – diversity of profiles, backgrounds, expertise, and techniques.

The list of medalists is now available. Visit https://worldskills.org/what/competitions/worldskills-lyon-2024/#results to discover the winners!

What’s next?

The impact of WorldSkills Lyon 2024 extends far beyond the event itself. As the competition unfolded, and millions of people followed it in person or through media, WorldSkills Lyon 2024 spotlighted the crucial role of vocational education in today’s world and in shaping our shared future. By celebrating excellence, the competition highlighted the incredible ability of youth to drive the change our world needs through their energy and dedication. The legacy of this event lies in every vocation it has sparked and every future career it has inspired. This 47th edition has once again shown the world that where there is skill, there is a way.

Media Contacts: 
Alice Nahon
PR Officer
[email protected] 

Anne-Laure TRONC
Press Relation Manager
[email protected] 

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