Annual Report 2015/16

Aalborg, Denmark, 2016-04-01 08:50 CEST (GLOBE NEWSWIRE) --  

SUMMARY

Results for 2015/16

The results before tax amounted to DKK -190.9 million*) for 2015/16 against DKK -17.4 million*) in 2014/15. This performance meets recent expectations. 

The Group’s total results after tax amounted to DKK -222.3 million against DKK -37.7 million in 2014/15. 

The results before tax were impacted by a negative value adjustment of investment properties as well as the impairment of projects and goodwill for a total of DKK 194.6 million. 

The balance sheet total came to DKK 2,808.8 million against DKK 2,845.2 million at 31 January 2015. The Group’s equity stood at DKK 1,285.7 million, equal to a solvency ratio of 45.8 %. 

Overview of segments:

Strategic focus 2018

In December 2015 TK Development’s Board of Directors determined a number of strategic goals and initiatives for the period until 2018. The aim is for TK Development to become an undiversified developer company and to create attractive shareholder value. 

The Group’s future strategic focus is property development in Denmark, Sweden and Poland. The return on equity from this business area is expected to amount to 15-20 % p.a. before tax as from the 2017/18 financial year. 

The operation of the Group’s asset management activities is to be matured and optimized, with a view to selling the activities within a period of three to five years, and the plan is to distribute the freed-up equity to TK Development’s shareholders. 

TK Development will continue its strong focus on substantially reducing the portfolio of land. 

The narrower future strategic focus will continuously reduce the Group’s capacity costs in the period until 2018. 

As part of the strategy, Management decided to launch a range of initiatives, including: 

• To initiate a process to sell the Czech activities. The Czech plots of land were written down in Q3 2015/16 by DKK 35.0 million to cover the risks associated with this sale. 

• To start the third of four phases of the Group’s residential project in Bielany, Warsaw, Poland. Current budget estimates necessitated making a writedown for impairment of these plots of land, and in Q3 2015/16 they were written down by DKK 37.8 million. The value of the plots of land totalled DKK 181.7 million at 31 January 2016. In step with the startup of the third and fourth phases, the plots will be transferred to Projects in progress. In addition, another Polish plot of land has been written down by DKK 7.5 million, as negotiations about the partial sale of this plot are currently ongoing. 

• To discontinue reporting separately on the Group’s discontinuing activities. A DKK 78.0 million writedown for impairment was made in Q3 2015/16 to cover the special risks associated with these activities. 

• To include land and development projects in the countries where the Group wishes to discontinue its activities in the longer term under asset management in the Group’s future reporting. 

• To write down goodwill by DKK 33.3 million; this writedown for impairment was made in Q3 2015/16. 

• To write down tax assets in Poland and the Czech Republic to DKK 0 million. 

Outlook for 2016/17

Management still expects consolidated results before tax for 2016/17 to total DKK 10-30 million. 

This profit estimate is based on the expectation that a number of ongoing small and medium-sized projects will be executed before the end of the current financial year. TK Development is recording good progress on the individual projects. The time horizon for the projects means that the majority of them are expected to be completed, handed over to the investor and thus recognized in income in Q4 2016/17. The Group’s most significant development projects are not expected to contribute to consolidated results until subsequent financial years. 

Property development

The results for this business area amounted to DKK 41.4 million before tax in 2015/16. At 31 January 2016 the balance sheet total came to DKK 1,094.1 million, and the equity tied up represented DKK 646.5 million. 

The sales completed by TK Development in 2015/16 included the following, all in Denmark: 

• Sale of ownership interest in apartments for young people of about 1,500 m² in Frederiksberg, Copenhagen.
• Sale of retail stores of about 3,700 m² at Marsvej in Randers.
• Sale of a 6,000 m² office project to Alfa Laval in Aalborg.
• Sale of a lot of about 13,000 m² at Amerika Plads, Copenhagen, to A.P. Møller - Mærsk A/S, of which TK Development’s ownership interest amounted to 50 %.
• Sale of building rights for almost 9,000 m² in Køge to Køge Municipality.
• Sale of a residential project of about 2,400 m² in Aarhus. 

Major development projects in progress: 

• Construction of the new shopping centre, BROEN Shopping, in Esbjerg, Denmark, started in May 2015. The current occupancy rate is 73 % of the premises. In May 2015 TK Development sold 65 % of the project to CapMan Real Estate, which is participating in completing its development. This sale has had no immediate impact on results. 

• The Group’s Strædet project in Køge, Denmark, comprises retail and residential units as well as public service and parking facilities. Construction started in March 2015. The retail project, of which 72 % has been let, has been sold conditionally to the Finnish company Citycon together with the parking facilities. 

• The second phase of the residential project in Bielany in Warsaw, Poland, is progressing as planned. The second phase consists of 297 retail units and service facilities, and 85 % of the units have been sold in advance at the budgeted selling prices. 

• Overall, TK Development has ongoing construction projects covering more than 85,000 m² and is recording good progress on these projects. 

The project pipeline is looking strong, and the projects are moving ahead at a good pace due to robust tenant and investor interest. 

Asset management

The results for this business area amounted to DKK -127.0 million before tax in 2015/16. At 31 January 2016 the balance sheet total came to DKK 1,632.0 million, and the equity tied up represented DKK 577.2 million. 

The portfolio of completed properties in this business area comprises a total floor space of 156,200 m² and at 31 January 2016 represented a value of DKK 1,169.8 million excluding joint venture projects and DKK 1,577.9 million including joint venture projects. The annual net rent from the current leases corresponds to a return on the carrying amount of 4.4 %. Based on full occupancy, the return on the carrying amount is expected to reach 6.2 %. 

Detailed development and operating plans have been drafted for each property, and good progress is being made in their realization in a number of areas. 

In addition, asset management activities comprise plots of land and development projects on markets where TK Development wishes to discontinue its activities in the longer term. The carrying amount of these plots and projects amounted to DKK 137.9 million at 31 January 2016. 

Financial issues

In Q4 2015/16 TK Development entered into an agreement with PKA regarding a DKK 500 million refinancing of Sillebroen in Frederikssund, Denmark, over a five-year term. 

In Q3 2015/16 TK Development extended its agreement with the Group’s main banker about operating and project credits until 30 September 2017. 

Of the total project credit facilities of DKK 1,392.8 million at 31 January 2016, facilities of DKK 336 million were due to expire prior to the end of January 2017. A significant portion of these facilities has been prolonged after the reporting date, and the remainder is expected to be prolonged before maturity. 

The expectations mentioned in this Annual Report, including earnings expectations, are naturally subject to risks and uncertainties, which may result in deviations from the expected results. Expectations may be impacted by factors generally applicable to the sector as well as the factors referred to under Risk issues and note 2 to the consolidated financial statements, Accounting estimates and judgments, including the valuation of the Group’s project portfolio.

*) Excluding tax withheld from Income from investments in joint ventures. 

Contact details:

Frede Clausen, President & CEO

Tel. +45 8896 1010