TK Development A/S
Interim Report Q1 2014/15

DGAP-News: TK Development A/S /

13.06.2014 / 08:46

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Company announcement no. 15/2014

Aalborg, Denmark, 2014-06-13 08:46 CEST (GLOBE NEWSWIRE) -- 



 RESULTS FOR THE FIRST QUARTER OF 2014/15

  -- In the first quarter of 2014/15, TK Development recorded results of DKK
     12.7 million before tax, excluding discontinuing activities, against DKK
     -15.2 million in the first quarter of 2013/14.



  -- The results after tax amounted to DKK 7.3 million in the first quarter of
     2014/15 against DKK -16.2 million in the same period of 2013/14.



  -- The balance sheet total amounted to DKK 3,147.5 million at 30 April 2014
     against DKK 3,347.1 million at 31 January 2014. Consolidated equity
     totalled DKK 1,555.1 million versus DKK 1,553.7 million at 31 January 2014,
     corresponding to a solvency ratio of 49.4 % (31 January 2014: 46.4 %).



  -- Cash flows for the period amounted to DKK 1.6 million against DKK -0.2
     million in the same period the year before. Net interest-bearing debt
     amounted to DKK 1,515.5 million at 30 April 2014 against DKK 1,890.9
     million at 31 January 2014.



  -- With effect from 1 February 2014, the Group has implemented IFRS 11, Joint
     Arrangements, which has resulted in changes to the Group's accounting
     policies. Following the implementation of IFRS 11, the Group's partly owned
     enterprises that are jointly controlled with other parties, and which have
     previously been included in the consolidated financial statements by
     pro-rata consolidation, must be recognized according to the equity method.
     The change affects a great number of items in the income statement, assets,
     equity and liabilities, and the overall result is a reduction of the
     Group's balance sheet total. The change has no impact on either the results
     or the equity of the Group.



PROPERTY DEVELOPMENT

  -- In February 2014 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.



  -- TK Development is working on the second phase of the Bielany residential
     project in Warsaw, Poland, which consists of about 300 residential units
     and service facilities. The pre-construction sale started in December 2013
     and has progressed better than expected. Pre-reservations have been
     received for 32 % of the units. Construction of the residential units,
     which are being sold as owner-occupied apartments to private users, started
     in June 2014 after the reporting date, and handover to the buyers is slated
     for spring 2016.



  -- In Jelenia Góra in Poland, TK Development is developing a shopping centre
     of about 24,400 m² as a joint venture with Heitman, in which the Group has
     an ownership interest of 30 %. To date lease agreements for about 51 % of
     the premises have been signed. Construction started in May 2014 after the
     reporting date, and the opening is scheduled for the end of 2015. TK
     Development will receive fee income from the jointly owned company for
     developing, letting and managing the construction of the project.



  -- In Esbjerg TK Development owns a plot earmarked for the construction of a
     new shopping centre, BROEN, of about 29,800 m². A building permit has been
     granted for the project. Before construction can start, the project must
     undergo a validation and approval procedure to ensure safe railway
     operations, etc. The validation process is under way and expected to be
     completed in autumn 2014, thus allowing construction to start up
     immediately afterwards. 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 participate in completing the project. This
     falls in line with the Group's business model, whose aims include entering
     into partnerships regarding major development projects.



  -- Since the reporting date TK Development has entered into an agreement
     regarding the sale of building rights for about 7,200 m² at Østre Teglgade
     in Copenhagen to a private investor. The profit on the sale will be
     recognized in the second quarter of 2014/15.



  -- The Group's project portfolio in the property development segment comprised
     403,000 m² at 30 April 2014 (31 January 2014: 405,000 m²).



 ASSET MANAGEMENT

  -- The total portfolio of properties that are under asset management and thus
     generate cash flow comprised 113,250 m² and amounted to DKK 1,539.2 million
     at 30 April 2014, including joint venture projects, compared to DKK 1,934.2
     million at 31 January 2014. The annual net rent from the current leases
     corresponds to a return on the carrying amount of 5.8 %. Based on full
     occupancy, the return on the carrying amount is expected to reach 7.3 %.



  -- These properties are performing at an acceptable level. Chain stores are
     managing satisfactorily, while local tenants are generally recording
     difficulties, and the current letting situation is affected by vacancies
     and short-term rent discount agreements with tenants.



  -- In February 2014 TK Development conditionally sold its 75 % stake in the
     Fashion Arena Outlet Center in Prague, the Czech Republic. The sale was
     finally completed in April 2014. The outlet centre has been sold to Meyer
     Bergman, and the selling price for the whole centre amounts to EUR 71.5
     million. This sale has generated a minor profit compared to the carrying
     amount, reduced the balance sheet total and made a substantial contribution
     to the Group's free cash resources.



DISCONTINUING ACTIVITIES

  -- The results of the discontinuing activities before tax amounted to DKK -4.5
     million in the first quarter of 2014/15 against DKK -3.8 million in the
     first quarter of 2013/14.



  -- At 30 April 2014 the balance sheet total for the discontinuing activities
     amounted to DKK 307.3 million against DKK 367.7 million at 31 January 2014,
     a decline of 16.4 %. The reduction essentially relates to the handover of
     the first phase of the DomusPro Retail Park, which has been sold in advance
     to the investor.



  -- TK Development's DomusPro Retail Park project in Vilnius, Lithuania, has
     been conditionally sold to BPT Baltic Opportunity Fund, which is managed by
     BPT Asset Management. 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. Construction of
     the second project phase will start once a satisfactory occupancy level has
     been reached.



  -- 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

  -- Management's assessment of the market conditions for the Group remains
     unchanged compared to its assessment in the Group's Annual Report,
     published in early April 2014. It is Management's general assessment that
     the Group's markets are showing signs of recovery.



  -- The Group's markets are characterized by expectations for financial growth
     and rising consumer confidence, although varying in strength from country
     to country. An increase in private consumption is anticipated.



  -- 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

  -- In April 2014 TK Development completed the sale of its 75 % stake in the
     Fashion Arena Outlet Center in Prague, the Czech Republic. This sale has
     substantially strengthened the Group's financial platform.



  -- At 31 January 2014 project credit facilities of DKK 0.1 billion were due to
     expire prior to the end of January 2015. About half of these credits have
     been repaid in connection with project sales, and the remaining credits are
     expected to be refinanced before maturity or to be repaid when projects are
     sold.



  -- TK Development has a general agreement with the Group's main banker about
     operating and project credits. When last reviewed, the agreement was
     extended until mid-2015.



OUTLOOK FOR 2014/15

  -- Management maintains the previously announced profit estimate for 2014/15.
     Thus, 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 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 2013/14
Annual Report, 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
News Source: NASDAQ OMX


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Language:    English             
Company:     TK Development A/S  
 
 
             Denmark             
ISIN:        DK0010258995        
 
 
End of News    DGAP News-Service  
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