Aalborg, Denmark, 2014-04-02 08:41 CEST (GLOBE NEWSWIRE) --
SUMMARY
RESULTS FOR 2013/14
In the 2013/14 financial year TK Development recorded results of DKK 3.9 million before tax, excluding discontinuing activities, against DKK -272.3 million for the 2012/13 financial year. The results for the year are in line with expectations.
The results after tax amounted to DKK -49.0 million for 2013/14 against DKK -493.3 million in 2012/13.
The balance sheet total amounted to DKK 3,839.6 million at 31 January 2014 against DKK 4,009.3 million at 31 January 2013. Consolidated equity totalled DKK 1,553.7 million versus DKK 1,389.7 million at 31 January 2013, corresponding to a solvency ratio of 40.5 % (31 January 2013: 34.7 %).
The cash flows for the year amounted to DKK 9.3 million against DKK -24.2 million the year before. Net interest-bearing debt amounted to DKK 1,890.9 million at 31 January 2014 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. 94 % of the project premises (Q3 2013/14: 82 %) have been let. Construction started in August 2013, and the opening is scheduled for autumn 2014. Earnings from the sale will be recognized in the 2014/15 financial year upon handover of the project to the investor.
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. Handover to the buyers began in February 2013. In total 97 % of the first-phase units have been sold (Q3 2013/14: 93 %). The startup of the next project phase is currently under preparation. A building permit for the second phase, consisting of about 300 residential units and service facilities, has been granted. The pre-construction sale, which started in December 2013, is progressing better than expected, with pre-reservations having been received for 29 % of the units. Construction is expected to begin in late spring 2014, and handover to the buyers is slated for spring 2016. The residential units will be sold as owner-occupied apartments to private users.
In the autumn of 2013 TK Development sold an 80 % stake in 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 interest 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 84 % (Q3 2013/14: 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 process of obtaining permits for the project has been delayed because the project must undergo a validation and approval procedure to ensure safe railway operations, etc. The validation procedure is expected to continue until after the end of the summer, and therefore construction startup is anticipated in autumn 2014. Discussions are being held with PFA regarding the sale of a share of the project at its current stage. Thus, if a final agreement is reached, PFA will take part in the value generation at an early project development stage. This falls in line with the Group’s business model, whose aims include entering into partnerships regarding major development projects.
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.
In February 2014, after the reporting date, TK Development conditionally sold a 6,000 m² office project in Aalborg, Denmark. The project is being developed for the international Alfa Laval Group, which has entered into a long-term lease for the property. The project has been sold to PensionDanmark at a total price of DKK 126.1 million. Construction began in March 2014, and the project will be handed over to the investor in June 2015. Earnings from the sale will be recognized in 2015/16 upon handover of the project to the investor.
The Group’s project portfolio in the property development area comprised 405,000 m² at 31 January 2014 (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 1,934.2 million at 31 January 2014, of which investment properties accounted for DKK 308.5 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. Chain stores are managing satisfactorily, while local tenants are generally recording difficulties. Overall the footfall and centre revenue are developing positively. In 2013 more than 16 million customers visited the Group’s six shopping and outlet centres, which corresponds to an index of 102 relative to 2012.
In February 2014, after the reporting date, TK Development conditionally sold its 75 % stake in the Fashion Arena Outlet Center in Prague, the Czech Republic. The outlet centre has been sold to Meyer Bergman, and the selling price for the whole property amounts to EUR 71.5 million. The sale is contingent on final financing, which is expected to fall into place in April 2014. This sale generates a minor profit compared to the carrying amount, reduces the balance sheet total by about DKK 400 million and makes a substantial contribution to the Group’s free cash resources.
DISCONTINUING ACTIVITIES
The results before tax of the discontinuing activities amounted to DKK -38.9 million in 2013/14 against DKK -53.7 million in 2012/13, of which DKK -13.3 million derives from current operations, DKK -1.0 million from losses recognized on completed sales, and DKK -24.6 million from impairment losses and value adjustments of remaining assets.
At 31 January 2014 the balance sheet total for the discontinuing activities amounted to DKK 367.7 million against DKK 425.4 million at 31 January 2013, a decline of 13.6 %. DomusPro Retail Park in Vilnius, which has been sold in advance, accounted for DKK 92.9 million of the balance sheet total at 31 January 2014.
In 2013/14 TK Development sold two of the Group’s German investment properties: a minor investment property was sold in June 2013, and in September 2013 another German investment property was sold at a price of DKK 43.8 million, corresponding 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 retail park will be built in two phases. Construction of the first phase of about 7,500 m² was completed in March 2014.
The timing and phase-out of the discontinuing activities are subject to major uncertainty. The phase-out is progressing, and the risk exists that these activities may be phased out at a value lower than their carrying amount.
MARKET CONDITIONS
In Management’s opinion, the market conditions are improving for the Group, which expects to see financial growth and rising consumer confidence in its markets, although levels will vary from country to country. Private consumption is expected to continue increasing.
In this phase of the business cycle, where economic growth is on the rise, some uncertainty, although diminishing, persists in the property markets, and the decision-making process of tenants, investors and financing sources remains lengthy and carefully considered.
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, but there also appears to be some relaxation of these requirements.
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 and project finance loans 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 until mid-2015.
Since 31 January 2013 TK Development has entered into agreements on the refinancing of project credits totalling DKK 1.2 billion. The main project credit that has been refinanced has been prolonged until mid-2015. At 31 January 2014 credit facilities of DKK 0.1 billion only were due to expire prior to 31 January 2015. The credits are expected to be refinanced prior to maturity or repaid in connection with the sale of projects.
The solvency ratio stood at 40.5 % at 31 January 2014, and thus the Group has fulfilled its strategic goal of achieving a solvency ratio of about 40 %.
In the course of the year, the Group obtained interest margin reductions on several major credits.
OUTLOOK FOR 2014/15
Management anticipates positive results of about DKK 40 million before tax, excluding discontinuing activities, for the 2014/15 financial year.
The timing and phase-out of the discontinuing activities are subject to major uncertainty. 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 2014/15.
The expectations mentioned in this announcement, 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", particularly the valuation of the Group’s project portfolio, as described under “Business risks” and “Risks related to the presentation of financial statements”.
Contact information:
TK Development A/S, Frede Clausen, President and CEO, tel. +45 8896 1010.
