Aalborg, Denmark, 2013-09-26 08:41 CEST (GLOBE NEWSWIRE) --
Results for the first half of 2013/14
· During the first six months of the 2013/14 financial year, TK Development recorded results before tax of DKK -24.3 million, of which the results for the discontinuing activities before tax amounted to DKK -8.0 million. For the first half of 2012/13, the results before tax amounted to DKK -40.0 million.
· The results after tax amounted to DKK -30.1 million against DKK -186.6 million in the first half of 2012/13.
· The balance sheet total amounted to DKK 3,941.4 million at 31 July 2013 against DKK 4,009.3 million at 31 January 2013. Consolidated equity totalled DKK 1,355.7 million, and the solvency ratio stood at 34.4 %.
· Cash flows for the period amounted to DKK -3.1 million against DKK -23.6 million in the same period the year before. Net interest-bearing debt amounted to DKK 2,183.4 million at 31 July 2013 against DKK 2,206.1 million at 31 January 2013.
Property development
· In June 2013 TK Development sold a 20,000 m² retail park project in Barkarby, Stockholm, Sweden, to a fund managed by Cordea Savills. The sale is based on forward funding, and 73 % of the project premises have been let. The option to purchase land for the project was exercised immediately before construction startup in August 2013. Earnings from the sale will be recognized in the 2014/15 financial year.
· In the municipality of Danderyd near Stockholm, TK Development handed over the first 13,000 m² 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. The total project has been sold to the German investment fund Commerz Real on the basis of forward funding.
· 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, Poland, was completed. The first units were handed over to the buyers in February 2013, with 61 % of all the units being handed over in the first half of 2013/14. In total, 88 % (Q1 2013/14: 76 %) of the first-phase units have been sold.
· 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 451,000 m² at 31 July 2013 (31 January 2013: 452,000 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 1,939.0 million at 31 July 2013, of which investment properties accounted for DKK 314.4 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
· In June 2013 a minor investment property in Germany was sold and handed over to the buyer.
· After the reporting date, an agreement has been concluded regarding the sale of a further German investment property, expected to be handed over to the buyer in early October 2013. The selling price amounts to DKK 43.8 million, equal to the carrying amount.
· In August 2013 TK Development announced that a Group 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 market conditions have not changed appreciably during the past months.
· The main challenge currently facing the property sector is the difficult access to financing. Uncertainty on the international financial markets continues to adversely affect the property sector, leading to consistently long decision-making processes among financing sources, tenants and investors alike.
· The Group will make the startup of major new projects contingent on obtaining full or partial financing for them and on freeing up cash resources from the sale of major completed projects.
Financial issues
Increase of capital base – to strengthen the Group’s financial platform
· 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 and 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 after the reporting date 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.
Now that the above-mentioned refinancing agreements are in place, credits of DKK 0.2 billion are due to mature in 2013/14. The Group is in ongoing dialogue with the relevant credit institutions, and Management anticipates being able to either prolong or otherwise refinance project credits that have not been prematurely repaid upon project sales.
· With the implementation of the capital increase, the Group has fulfilled its strategic goal of adjusting the balance sheet and having 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, and the results of these activities are therefore not included in the outlook for the 2013/14 financial year.
· As mentioned previously, Management has revised the sales strategy for the Group’s projects and chosen to accept reduced prices for selected project sales. Thus, Management considers it important for the Group to sell some of its completed projects and plots of land in the 2013/14 financial year.
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
