Aalborg, Denmark, 2013-12-18 08:43 CET (GLOBE NEWSWIRE) --
SUMMARY
Results for the first nine months of 2013/14
During the first nine months of the 2013/14 financial year, TK Development recorded results of DKK -21.6 million before tax for the continuing activities against DKK -292.7 million for the same period of 2012/13.
The balance sheet total amounted to DKK 3,936.2 million at 31 October 2013 against DKK 4,009.3 million at 31 January 2013. Consolidated equity totalled DKK 1,566.2 million, and the solvency ratio stood at 39.8 %.
Cash flows for the period amounted to DKK 11.3 million against DKK -22.4 million in the same period the year before. Net interest-bearing debt amounted to DKK 1,921.7 million at 31 October 2013 against DKK 2,206.1 million at 31 January 2013.
Property development
In June 2013 TK Development sold a retail park project of about 20,000 m² in Barkarby, Stockholm in Sweden, to a fund managed by Cordea Savills. The sale is based on forward funding. 82 % of the project premises (Q2 2013/14: 73 %) have been let. The option to purchase land for the project was exercised immediately before construction startup in August 2013. Construction is progressing as planned. Earnings from the sale will be recognized in the 2014/15 financial year.
In the municipality of Danderyd near Stockholm, TK Development handed over close to 13,000 m² – the first phase of a retail park – to an investor in 2010/11. The second phase of about 1,800 m² was completed in March 2013 and handed over to the investor in the first quarter of 2013/14.
In January 2013 construction of the first phase of 7,850 m², a total of 136 units, of TK Development’s residential project in Bielany, Warsaw in Poland, was completed. The first units were handed over to the buyers in February 2013. In total 93 % of the first-phase units have been handed over (Q2 2013/14: 88 %).
In the third quarter of 2013/14 TK Development sold 80 % of a planned shopping centre project of 14,800 m2 in the Czech town of Frýdek Místek to a business partner. Following the sale, TK Development currently holds an ownership share in the project of 10 %. TK Development will receive fee income for letting and managing the construction of the project and related services. The current occupancy rate is 82 %. Construction started in autumn 2013, and the opening is scheduled for the end of 2014.
In Esbjerg, TK Development owns a plot earmarked for the construction of a new shopping centre, BROEN, of about 29,800 m². The current occupancy rate is 72 %. TK Development is in dialogue with a potential investor about the sale of a project share. Preparatory construction works have been initiated, but the project must undergo a special validation and approval process to ensure safe railway operations, etc., which will postpone the startup of construction.
In addition, agreements regarding the letting and sale of several minor retail projects have been concluded. The earnings from these sales are expected to be recognized in the 2014/15 financial year upon handover of the projects to the investors.
The Group’s project portfolio in the property development area comprised 434,000 m² at 31 October 2013 (31 July 2013: 451,000 m²).
Asset management
The total portfolio of own properties under asset management, which thus generates cash flow, comprised 138,250 m² and amounted to DKK 1,943.6 million at 31 October 2013, of which investment properties accounted for DKK 314.7 million. The annual net rent from the current leases corresponds to a return on the carrying amount of 6.7 %. Based on full occupancy, the return on the carrying amount is expected to reach 7.9 %.
The operation of these properties is generally proceeding satisfactorily. Overall the revenue in the centres is developing positively, but the footfall is showing signs of decline at a few centres.
Discontinuing activities
For the first nine months of 2013/14, results before tax of the discontinuing activities amounted to DKK -13.5 million against DKK -33.7 million in the same period the year before.
At 31 October 2013 the balance sheet total for the discontinuing activities amounted to DKK 374.7 million against DKK 425.4 million at 31 January 2013, a decline of 11.9 %. DomusPro Retail Park in Vilnius, Lithuania, accounted for DKK 78.9 million of the balance sheet total at 31 October 2013. The results before tax of the discontinuing activities, DKK -13.5 million, included impairment losses on the project portfolio of DKK 3.4 million.
In June 2013 a minor investment property in Germany was sold and handed over to the buyer.
In September 2013 TK Development entered into an agreement regarding the sale of an additional German investment property, which was handed over to the buyer at the end of September 2013. The selling price of DKK 43.8 million equals the carrying amount.
In August 2013 TK Development announced that the Group’s project, DomusPro Retail Park in Vilnius, Lithuania, had been conditionally sold to BPT Baltic Opportunity Fund, which is managed by BPT Asset Management. The project will be handed over to the buyer once the usual commercial conditions have been met, including those relating to project construction and letting. The selling price is based on a return requirement of 8.5 %. The project is to be built in phases, and construction of the first phase of about 7,500 m2 started in August 2013, with the opening scheduled for spring 2014.
Market conditions
In Management’s opinion the Group’s markets are showing signs of recovery. Consumer confidence is rising generally, and expectations for financial growth in the Group’s markets are mounting, although varying from country to country.
However, uncertainty in the Group’s markets is greater than usual during this economic growth phase of the business cycle, rendering the property markets somewhat precarious and leading to consistently long decision-making processes among investors, tenants and financing sources in the individual countries.
Access to project financing, which has remained difficult for a prolonged period, poses the greatest challenge to the property sector. The Group is now experiencing an easing in project finance restraints. The options for procuring financing vary from project to project, depending on the type, location and status of the properties concerned, including letting and sales. When granting project finance credits, the banks continue to require relatively high borrower equity.
Financial issues
At the Company’s Annual General Meeting on 22 May 2013, the Board of Directors was authorized to carry out a capital increase with gross proceeds of about DKK 210-231 million. The capital increase was implemented in September 2013.
A substantial portion of the proceeds from the capital increase has been used to reduce the debt to credit institutions, as well as project finance loans of DKK 68.5 million granted by a number of the Company’s major shareholders and members of Management.
TK Development has a general agreement with the Group’s main banker about operating and project credits. The agreement has been extended for a two-year period, subject to the condition that the operating credit limit be reduced by DKK 83.5 million after the implementation of the capital increase. This reduction took place in September 2013.
Since 31 January 2013 TK Development has entered into agreements on the refinancing of project credits totalling DKK 1.2 billion. The most significant project credit refinanced has been extended by two years, subject to the condition that the credit be reduced by DKK 50 million after the implementation of the capital increase. This reduction took place in September 2013.
At 31 October 2013 a credit facility worth DKK 0.1 billion was due to expire in 2013/14. A conditional agreement with the lender regarding this credit has been signed, and the conditions for renewing the agreement are expected to be met before the credit matures at the end of January 2014.
With the implementation of the capital increase, the Group has fulfilled its strategic goal of achieving a solvency ratio of about 40 %. Moreover, the Group has obtained interest margin reductions on several major credits.
Outlook for 2013/14
Management anticipates positive results before tax for the continuing activities for the 2013/14 financial year.
The timing and phase-out of the discontinuing activities are subject to major uncertainty. The results before tax of the discontinuing activities amounted to DKK -13.5 million for the first nine months of 2013/14. The activities are in the process of being discontinued, and the Group risks incurring further losses before the phase-out is complete. Therefore, the results before tax of the discontinuing activities have not been included in the outlook for 2013/14.
The expectations mentioned in this Interim Report, including earnings expectations, are naturally subject to risks and uncertainties, which may result in deviations from the expected results. Various factors may impact on expectations, as outlined in the section "Risk issues" in the Group’s Annual Report for 2012/13, particularly the valuation of the Group’s project portfolio.
Contact details:
Frede Clausen, President & CEO
Tel. +45 8896 1010
