Page 1

ILLUSTRATION: FRÝDEK MÍSTEK, SHOPPING CENTRE CZECH REPUBLIC

TK DEVELOPMENT A/S | CVR NO. 24256782 COMPANY ANNOUNCEMENT NO. 32/2013 | 18 DECEMBER 2013

INTERIM REPORT Q1-Q3

2013/14


TA B L E O F C O N T E N T S

Page 3 Summary 5

Consolidated financial highlights and key ratios

6

Results in Q1-Q3 2013/14 and outlook for 2013/14

12

Market conditions

13

Property development

18

Asset management

23

Discontinuing activities

25

Other matters

26

Statement by the Board of Directors and Executive Board on the Interim Report

27

Consolidated financial statements

36

Company information

2 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | Table of contents


SUMMARY R E S U LT S FO R T H E F I R S T N I N E M O N T H S O F ILLUSTRATION:

2013/14

BARKARBY GATE, RETAIL PARK

During the first nine months of the 2013/14 financial year,

STOCKHOLM, SWEDEN

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 %. construction of a new shopping centre, BROEN, of about Cash flows for the period amounted to DKK 11.3 million

29,800 m². The current occupancy rate is 72 %. TK Devel-

against DKK -22.4 million in the same period the year before.

opment is in dialogue with a potential investor about the

Net interest-bearing debt amounted to DKK 1,921.7 million

sale of a project share. Preparatory construction works have

at 31 October 2013 against DKK 2,206.1 million at 31 Janu-

been initiated, but the project must undergo a special valida-

ary 2013.

tion and approval process to ensure safe railway operations, etc., which will postpone the startup of construction.

P RO P E RT Y D E V E LO PM E N T In June 2013 TK Development sold a retail park project of

In addition, agreements regarding the letting and sale of

about 20,000 m² in Barkarby, Stockholm in Sweden, to

several minor retail projects have been concluded. The ear-

a fund managed by Cordea Savills. The sale is based on

nings from these sales are expected to be recognized in the

forward funding. 82 % of the project premises (Q2 2013/14:

2014/15 financial year upon handover of the projects to the

73 %) have been let. The option to purchase land for the

investors.

project was exercised immediately before construction startup in August 2013. Construction is progressing as planned.

The Group’s project portfolio in the property development

Earnings from the sale will be recognized in the 2014/15 fi-

area comprised 434,000 m² at 31 October 2013 (31 July

nancial year.

2013: 451,000 m²).

In the municipality of Danderyd near Stockholm, TK Develop-

ASSET MANAGEMENT

ment handed over close to 13,000 m² – the first phase of a

The total portfolio of own properties under asset manage-

retail park – to an investor in 2010/11. The second phase of

ment, which thus generates cash flow, comprised 138,250

about 1,800 m² was completed in March 2013 and handed

m² and amounted to DKK 1,943.6 million at 31 October

over to the investor in the first quarter of 2013/14.

2013, of which investment properties accounted for DKK 314.7 million. The annual net rent from the current leases

In January 2013 construction of the first phase of 7,850 m²,

corresponds to a return on the carrying amount of 6.7 %.

a total of 136 units, of TK Development’s residential project

Based on full occupancy, the return on the carrying amount

in Bielany, Warsaw in Poland, was completed. The first units

is expected to reach 7.9 %.

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 %).

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

In the third quarter of 2013/14 TK Development sold 80 %

at a few centres.

of a planned shopping centre project of 14,800 m in the 2

Czech town of Frýdek Místek to a business partner. Follow-

DISCONTINUING ACTIVITIES

ing the sale, TK Development currently holds an ownership

For the first nine months of 2013/14, results before tax of

share in the project of 10 %. TK Development will receive

the discontinuing activities amounted to DKK  -13.5 million

fee income for letting and managing the construction of the

against DKK -33.7 million in the same period the year before.

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.

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 %. Do-

In Esbjerg, TK Development owns a plot earmarked for the

musPro Retail Park in Vilnius, Lithuania, accounted for DKK

S ummary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 3 / 3 6


SUMMARY

78.9 million of the balance sheet total at 31 October 2013.

A substantial portion of the proceeds from the capital in-

The results before tax of the discontinuing activities, DKK

crease has been used to reduce the debt to credit institu-

-13.5 million, included impairment losses on the project port-

tions, as well as project finance loans of DKK 68.5 million

folio of DKK 3.4 million.

granted by a number of the Company’s major shareholders and members of Management.

In June 2013 a minor investment property in Germany was sold and handed over to the buyer.

TK Development has a general agreement with the Group’s main banker about operating and project credits. The agre-

In September 2013 TK Development entered into an agree-

ement has been extended for a two-year period, subject to

ment regarding the sale of an additional German investment

the condition that the operating credit limit be reduced by

property, which was handed over to the buyer at the end of

DKK 83.5 million after the implementation of the capital in-

September 2013. The selling price of DKK 43.8 million equ-

crease. This reduction took place in September 2013.

als the carrying amount. Since 31 January 2013 TK Development has entered into ag In August 2013 TK Development announced that the Group’s

reements on the refinancing of project credits totalling DKK

project, DomusPro Retail Park in Vilnius, Lithuania, had been

1.2 billion. The most significant project credit refinanced has

conditionally sold to BPT Baltic Opportunity Fund, which is

been extended by two years, subject to the condition that

managed by BPT Asset Management. The project will be

the credit be reduced by DKK 50 million after the implemen-

handed over to the buyer once the usual commercial condi-

tation of the capital increase. This reduction took place in

tions have been met, including those relating to project con-

September 2013.

struction and letting. The selling price is based on a return requirement of 8.5 %. The project is to be built in phases,

At 31 October 2013 a credit facility worth DKK 0.1 billion

and construction of the first phase of about 7,500 m2 star-

was due to expire in 2013/14. A conditional agreement with

ted in August 2013, with the opening scheduled for spring

the lender regarding this credit has been signed, and the

2014.

conditions for renewing the agreement are expected to be met before the credit matures at the end of January 2014.

MARKET CONDITIONS In Management’s opinion the Group’s markets are showing

With the implementation of the capital increase, the Group

signs of recovery. Consumer confidence is rising generally,

has fulfilled its strategic goal of achieving a solvency ratio

and expectations for financial growth in the Group’s markets

of about 40 %. Moreover, the Group has obtained interest

are mounting, although varying from country to country.

margin reductions on several major credits.

However, uncertainty in the Group’s markets is greater than

O U T L O O K FO R 2 0 1 3 / 1 4

usual during this economic growth phase of the business

Management anticipates positive results before tax for the

cycle, rendering the property markets somewhat precarious

continuing activities for the 2013/14 financial year.

and leading to consistently long decision-making processes among investors, tenants and financing sources in the indi-

The timing and phase-out of the discontinuing activities are

vidual countries.

subject to major uncertainty. The results before tax of the discontinuing activities amounted to DKK -13.5 million for the

Access to project financing, which has remained difficult

first nine months of 2013/14. The activities are in the process

for a prolonged period, poses the greatest challenge to the

of being discontinued, and the Group risks incurring further los-

property sector. The Group is now experiencing an easing in

ses before the phase-out is complete. Therefore, the results

project finance restraints. The options for procuring finan-

before tax of the discontinuing activities have not been inclu-

cing vary from project to project, depending on the type,

ded in the outlook for 2013/14.

location and status of the properties concerned, including letting and sales. When granting project finance credits, the

The expectations mentioned in this Interim Report, including

banks continue to require relatively high borrower equity.

earnings expectations, are naturally subject to risks and uncertainties, which may result in deviations from the expected

FINANCIAL ISSUES

results. Various factors may impact on expectations, as out-

At the Company’s Annual General Meeting on 22 May 2013,

lined in the section “Risk issues” in the Group’s Annual Report

the Board of Directors was authorized to carry out a capital

for 2012/13, particularly the valuation of the Group’s project

increase with gross proceeds of about DKK 210-231 million.

portfolio.

The capital increase was implemented in September 2013.

4 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | S ummary


C O N S O L I D AT E D F I N A N C I A L H I G H L I G H T S A N D K E Y R AT I O S

DKKm

Q1-Q3

Q1-Q3

Full year

2013/14

2012/13

2012/13

FINANCIAL HIGHLIGHTS: Net revenue

285.5

Value adjustment, investment properties, net Gross profit/loss Operating profit/loss (EBIT)

204.0

632.3

-0.3

-32.5

-37.8

111.9

-191.7

-139.5

41.2

-269.0

-241.1

Financing, etc.

-77.4

-58.7

-87.4

Profit/loss before tax and writedowns, etc.

-28.8

-1.7

-0.3

Profit/loss before tax

-35.1

-326.4

-326.0

Profit/loss for the period

-39.2

-473.4

-493.3 4,009.3

Balance sheet total

3,936.2

4,338.1

Property, plant and equipment

450.0

420.2

498.8

of which investment properties/investment properties under construction

448.5

417.2

496.3

Total project portfolio

3,019.2

3,395.7

3,030.9

Equity

1,566.2

1,414.1

1,389.7

Cash flows from operating activities Net interest-bearing debt, end of period

-22.2

-116.5

45.6

1,921.7

2,353.6

2,206.1

K E Y R AT I O S : Return on equity (ROE) *)

-3.6%

-38.4 %

-30.2 %

EBIT margin

14.4%

-131.9 %

-38.1 %

Solvency ratio (based on equity)

39.8%

32.6 %

34.7 %

16.0

28.9

28.4

0.4

0.4

0.4

Number of shares, end of period

98,153,335

42,065,715

42,065,715

Average number of shares

59,735,537

42,065,715

42,065,715 -10.1

Equity value in DKK per share Price/book value (P/BV)

Earnings per share (EPS) in DKK

-0.7

-9.7

Dividend in DKK per share

0

0

0

Listed price in DKK per share

7

12

11

Return on equity (ROE) *)

-3.6 %

-38.4 %

-30.2 %

Solvency ratio (based on equity)

39.8 %

32.6 %

34.7 %

Equity value in DKK per share

16.0

28.9

28.4

Diluted earnings per share (EPS-D) in DKK

-0.7

-9.7

-10.1

K E Y R AT I O S A D J U S T E D FO R WA R R A N T S :

The calculation of key ratios is based on the 2010 guidelines issued by the Danish Society of Financial Analysts. The comparative figures that include the number of shares have been corrected by an adjustment factor of 0.86 to show the effect of the capital increase implemented. *)

Annualized.

CO N S OC L onsolidated I D AT E D F I N A Nfinancial C I A L H I G Hhighlights L I G H T S A N and D K Ekey Y R AT I O S | | QQ11- -QQ33 22001133//1144 | | TTKK DDEEVVEELO ratios LOPM PMEENNTT AA//SS | | 55 / 3 6


R E S U LT S I N Q 1 - Q 3 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 3 / 1 4

During the first nine months of the 2013/14 financial year, TK

The activities within each individual business segment are de-

Development recorded results of DKK -21.6 million before tax

scribed in more detail on pages 13-24.

for the continuing activities against DKK -292.7 million in the The property development segment is described on pages

same period the year before.

13-17. The description includes information about the The results before tax, including discontinuing activities,

development potential of TK Development’s project portfolio,

amounted to DKK -35.1 million against DKK -326.4 million for

including an outline of the individual development projects.

the first nine months of 2012/13. The asset management segment is described on pages The results after tax amounted to DKK -39.2 million against

18-22. The description contains information about TK

DKK -473.4 million in the same period of 2012/13.

Development’s own properties under asset management, including an outline of the operation and customer influx for the individual projects.

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 sol-

The discontinuing activities are described on page 23-24,

vency ratio stood at 39.8 %.

which provides more details about TK Development’s properties and projects in the countries where Management has decided to phase out activities.

The results for the first nine months of 2013/14 and the balance sheet at 31 October 2013, broken down by business segment, appear from the tables below. R E S U LT S Q 1 - Q 3 2 0 1 3 / 1 4 ( D K K M ) Q1-Q3

Property

Asset

2013/14

development

management

Discontinuing

Revenue

285.5

174.2

102.2

9.1

0.0

Gross margin

111.9

24.7

89.0

-1.8

0.0

Profit/loss

Unallocated

Costs

69.5

-

-

7.5

62.0

Operating profit/loss

41.2

24.7

89.0

-9.3

-63.2

Financing, net

-77.4

-14.7

-47.8

-4.5

-10.4

Profit/loss before tax

-35.1

10.6

41.4

-13.5

-73.6

4.1

-

-

-

Tax on the profit/loss for the period Profit/loss for the period

-39.2

4.1 -77.7

B A L A N C E S H E E T S T R U C T U R E AT 3 1 O C T 2 0 1 3 ( D K K M ) Balance sheet Assets Investment properties Investment properties under construction Other non-current assets Projects in progress or completed Receivables Cash, cash equivalents, escrow accounts, etc. Assets

31 Oct

Property

Asset

2013

development

management

Discontinuing

426.4

-

314.7

111.7

22.1

22.1

-

-

-

163.2

3.8

3.3

-

156.1

3,019.2

1,149.9

1,628.9

240.4

-

223.8

58.7

139.9

22.2

3.0

Unallocated -

81.5

22.8

15.7

0.4

42.6

3,936.2

1,257.3

2,102.5

374.7

201.7

Equity and liabilities

 

Equity

1,566.2

661.2

758.3

227.6

-80.9

Credit institutions

2,031.6

489.7

1,186.0

114.8

241.1

338.4

106.4

158.2

32.3

41.5

3,936.2

1,257.3

2,102.5

374.7

201.7

Other liabilities Equity and liabilities Solvency ratio

39.8 %

52.6 %

36.1 %

60.7 %

-40.1 %

The financial review above contains a description of the results and balance sheet total at group level only.

6 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


R E S U LT S I N Q 1 - Q 3 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 3 / 1 4

ACCOUNTING POLICIES

Handed-over projects

The Interim Report is presented in accordance with IAS 34, In-

Retail park, Enebyängen, Danderyd, Sweden

terim Financial Reporting, as adopted by the EU, and Danish dis-

In the municipality of Danderyd near Stockholm, TK Develop-

closure requirements for listed companies.

ment handed over close to 13,000 m² – the first phase of the retail park – to an investor in 2010/11. The second phase of

The Interim Report has been presented in accordance with

about 1,800 m² was completed in March 2013 and handed over

the financial reporting standards (IFRS/IAS) and IFRIC interpre-

to the investor in the first quarter of 2013/14. The second

tations applicable for financial years beginning at 1 February

phase is fully let and tenanted by Plantagen (2012/13: 100 %).

2013.

The total project has been sold to the German investment fund Commerz Real.

The implementation of new and amended financial reporting standards and interpretations that have entered into force as

Residential park, Bielany, Warsaw, Poland

of the 2013/14 financial year has not impacted recognition and

Construction of the first phase of 7,850 m², a total of 136 units,

measurement in the consolidated financial statements and

was completed in January 2013, and the first units were hand-

thus has no effect on the earnings per share and the diluted

ed over to the buyers in February 2013. Agreements for the

earnings per share.

sale of 93 % (Q2 2013/14: 88 %) of the units have now been concluded. 50 % of the units were handed over to the buyers

In March 2013 the Board of Directors decided to change the

in Q1 2013/14, 11 % in Q2 2013/14, and a further 23 % in Q3

internal reporting procedure. In this connection, the segment

2013/14. The residential units are being sold as owner-occu-

definition has been revised, and segments are now divided into

pied apartments to private users.

property development, asset management and discontinuing activities. The comparative figures have been restated accord-

Shopping centre, Frýdek Místek, Czech Republic

ingly.

In the third quarter of 2013/14 TK Development sold 80 % of a planned shopping centre project of 14,800 m2 in the Czech

The accounting policies have been applied consistently with

town of Frýdek Místek to a business partner. Following the sale,

those presented in the Annual Report for 2012/13. Reference

TK Development currently holds an ownership share in the proj-

is made to the Annual Report for a complete description of the

ect of 10 %. TK Development will receive fee income for letting

Group’s accounting policies.

and managing the construction of the project and related services.

No interim financial statements have been prepared for the Parent Company. The Interim Report is presented in DKK, which

Gross margin

is the presentation currency for the Group’s activities and the

The gross margin amounted to DKK 111.9 million against DKK

functional currency of the Parent Company. The Interim Report

-191.7 million in the first nine months of 2012/13. The gross

has not been audited or reviewed by the Company’s auditors.

margin derives from the operation of the Group’s completed projects, the operation and value adjustment of the Group’s in-

A C C O U N T I N G E S T I M AT E S A N D J U D G M E N T S

vestment properties and profits on handed-over projects.

The most significant accounting estimates and judgments made by Management in applying the Group’s accounting pol-

The value adjustment of the Group’s investment properties

icies, and the associated, estimated material uncertainty, are

amounted to DKK -0.3 million net, with DKK -1.0 million relat-

the same as those made in the preparation of the Annual Re-

ing to the German investment properties and DKK 0.7 million

port for 2012/13. For a more detailed description, reference is

relating to remaining investment properties. The value adjust-

therefore made to the Annual Report.

ment amounted to DKK -32.5 million for the first nine months of 2012/13.

I N C O M E S TAT E M E N T Revenue

Staff costs and other external expenses

The revenue for the period under review totalled DKK 285.5

Staff costs and other external expenses amounted to DKK

million against DKK 204.0 million in the first nine months of

69.5 million against DKK 75.6 million for the first nine months

2012/13.

of 2012/13, a reduction of about 8 %.

The revenue stems from the sale of projects, rental and fee in-

Staff costs amounted to DKK 49.1 million against DKK 52.7 mil-

come, etc.

lion in the same period the year before, a decline of about 7 %. The number of employees totalled 92 at 31 October 2013

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 7 / 3 6


R E S U LT S I N Q 1 - Q 3 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 3 / 1 4

(31 July 2013: 102), including employees working at operational

to the Group’s property development and asset management

shopping centres.

activities in Poland and the Czech Republic. There are no indications of any need to impair the value of goodwill.

Other external expenses amounted to DKK 20.4 million, a reduction of about 11 % compared to the first nine months of

Investment properties and investment properties under con-

2012/13.

struction TK Development’s investment properties consist of:

Overheads are to be reduced by around 20 % relative to 2012/13, with half of the reduction deriving from the discontinuation of activities in Germany, Finland and the Baltic States.

Futurum Hradec Králové, shopping centre, the Czech Republic (a 20 % interest)

Cost-reducing measures have been implemented and are ex-

Galeria Tarnovia, shopping centre, Tarnów, Poland (a 30 % interest)

pected to achieve full impact in the course of 2014/15.

German investment properties.

Development in costs:

The total value of the Group’s investment properties amount-

180

ed to DKK 426.4 million against DKK 479.4 million at 31 Janu-

150

ary 2013. The decline relates mainly to the sale of two of the

120

Group’s German investment properties.

90

DKK 111.7 million of the value at 31 October 2013 is attribut-

60

able to the Group’s German investment properties, which are

30

described in more detail in the section “Discontinuing activities”

0

9 /0

08

20

09

0 /1

20

Costs, DKKm

1 /1

10

20

2 /1

11

20

3

20

1

Costs, trend

1 2/

/

13

20

B 14

/

14

20

E 15

below. The two remaining investment properties, totalling DKK 314.7 million, fall under the asset management activities and are described in more detail under that heading.

Financing TK Development realized net financing expenses of DKK 77.4

The valuation of the Czech investment property, the Futurum

million against DKK 58.7 million in the first nine months of

Hradec Králové shopping centre, made at 31 January 2013 was

2012/13. The increase is attributable partly to higher financing

based on the ongoing sales process. This valuation was upheld

costs on individual project credits and partly to the declining

at 31 October 2013.

volume of projects on which interest is capitalized following the decision to sell some of the Group’s plots of land.

TK Development’s 30 % ownership interest in Galeria Tarnovia has been valued at fair value based on the agreement made

In connection with the capital increase implemented in Sep-

in December 2012 regarding the sale of 70 % of the centre to

tember 2013, TK Development has obtained interest margin

Heitman.

reductions on several major credits. TK Development’s investment properties under construction Corporate income tax

consist of the Group’s ownership interest in the Jelenia Góra

Tax on the results for the period amounts to DKK 4.1 million.

development project in Poland. No value adjustment of this

The tax amount has been negatively affected by a DKK 8.5 mil-

project was made at 31 October 2013, pending fulfilment of

lion impairment of the Group’s Danish tax asset following the

the conditions in the agreement with the investor, and thus

adoption of new legislation to gradually reduce the corporate

startup of the project.

tax rate, which has lengthened the time horizon for utilizing the Group’s Danish tax asset.

Deferred tax assets Deferred tax assets were recorded at DKK 120.5 million in the

BALANCE SHEET

balance sheet against DKK 127.0 million at 31 January 2013.

The Group’s balance sheet total amounted to DKK 3,936.2 million, which is a decline of DKK 73.1 million compared to 31 Jan-

The valuation of the tax assets is based on existing budgets

uary 2013.

and profit forecasts for a five-year period. For the first three years, budgets are based on an evaluation of specific projects

Goodwill

in the Group’s project portfolio. The valuation for the next two

Goodwill is unchanged compared to 31 January 2013, amount-

years is based on specific projects in the project portfolio with

ing to DKK 33.3 million at the reporting date. Goodwill relates

a longer time horizon than three years as well as various project

8 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


R E S U LT S I N Q 1 - Q 3 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 3 / 1 4

opportunities.

DKK 1,389.7 million at 31 January 2013.

Due to the substantial uncertainties attached to these valu-

The Group’s equity includes the net proceeds of DKK 218.6 mil-

ations, provisions have been made for the risk that projects

lion of the capital increase implemented in September 2013.

are postponed or not implemented and the risk that project

Moreover, since 31 January 2013 equity has partly been affect-

profits fall below expectations. A change in the conditions and

ed by the results for the period and negative market-value ad-

assumptions for budgets and profit forecasts, including time

justments after tax of DKK 3.4 million related to foreign subsid-

estimates, could result in the value of the tax assets being low-

iaries and hedging instruments.

er than that computed at 31 October 2013, which could have an adverse effect on the Group’s results of operations and fi-

The solvency ratio amounts to 39.8 %.

nancial position. With the implementation of the capital increase, the Group has Project portfolio

thus fulfilled its strategic goal of achieving a solvency ratio of

The total project portfolio came to DKK 3,019.2 million against

about 40 %.

DKK 3,030.9 million at 31 January 2013. The decline is a combined result of an increase in the Group’s portfolio of ongoing

Equity and solvency:

projects and a decrease due to the sale of projects.

2,000

ment properties amounted to DKK 2,086 million at 31 October 2013 (31 July 2013: DKK 2,126 million), and the Group’s net

0

31 Jan 09

31 Jan 10

Equity, DKKm

31 Jan 12

31 Jan 13

39,8 %

31 Jan 11

34.7 %

40.4 %

The Group’s total portfolio of completed projects and invest-

500

59 %

ects to investors in the first nine months of 2013/14.

40.4 %

1,000

January 2013. The decline results from the handover of proj-

36.4 %

amounted to DKK 0.3 million against DKK 369.6 million at 31

1,500 39.5 %

Total prepayments based on forward-funding agreements

31 Oct 13

Solvency ratio

interest-bearing debt amounted to DKK 1,922 million (31 July

Non-current liabilities

2013: DKK 2,183 million).

The Group’s non-current liabilities represented DKK 139.8 million against DKK 141.0 million at 31 January 2013. The differ-

Total portfolio and interest-bearing debt:

ence is primarily attributable to debt owing to credit institu-

2500

tions.

1875

Current liabilities The Group’s current liabilities represented DKK 2,230.2 million

1250

against DKK 2,478.6 million at 31 January 2013.

625 0

31 Jan 09

31 Jan 10

31 Jan 11

31 Jan 12

31 Jan 13

31 Oct 13

Net interest-bearing debt, DKKm

C A S H F L O W S TAT E M E N T The Group’s cash flows from operating activities were negative in the amount of DKK 22.2 million (Q2 2013/14: positive in the

Investment properties and completed projects, DKKm

amount of DKK 43.1 million). This amount is mainly a combined Receivables

result of the reduction in funds tied up in projects following

Total receivables amounted to DKK 223.8 million, a decline of

project sales, new project investments, interest and tax paid,

DKK 17.2 million from 31 January 2013 that relates mainly to

as well as other operating items.

other receivables. The Group’s cash flows from investing activities were positive Cash and cash equivalents

in the amount of DKK 47.6 million (Q2 2013/14: positive in the

Cash and cash equivalents amounted to DKK 42.5 million

amount of DKK 6.8 million), due mainly to the realized sale of

against DKK 31.2 million at 31 January 2013. The Group’s total

two of the Group’s German investment properties.

cash resources, see note 4, came to DKK 94.5 million against The cash flows from financing activities were negative in

DKK 70.1 million at 31 January 2013.

the amount of DKK 14.1 million (Q2 2013/14: negative in the Equity

amount of DKK 53.0 million). The negative cash flows are a

The Group’s equity came to DKK 1,566.2 million against

combined result of the proceeds generated by the capital in-

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 9 / 3 6


R E S U LT S I N Q 1 - Q 3 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 3 / 1 4

2014/15.

crease implemented in September 2013, the reduction in payables to credit institutions and the financing raised for project investments.

Financing costs are to be normalized as a result of the initiatives implemented.

Overall cash flows for the period are positive in the amount of

In connection with the implementation of the capi-

DKK 11.3 million against DKK -22.4 million in the same period

tal increase, the Group has reached agreements for

the year before.

a reduction of the interest payable on several major credits, and is currently negotiating interest rate re-

E X E C U T I O N O F A N N O U N C E D S T R AT E G Y

ductions for other credits.

As described in company announcement no. 6/2013 and the Annual Report for 2012/13, in March 2013 Management re-

Management believes that a platform for normalized earnings

solved to revise the Group’s strategy and business model and

will have been established once the above-mentioned adapta-

to adjust its market focus.

tions have been implemented.

As announced previously, the goal is to execute these adjust-

FINANCIAL ISSUES

ments within a period of two years. In Management’s opinion,

Capital increase

the strategy execution is progressing satisfactorily and as

At the Company’s Annual General Meeting on 22 May 2013,

planned.

the Board of Directors was authorized to carry out a capital increase with gross proceeds of about DKK 210-231 million. The

The initiatives adopted and the current status of their execu-

capital increase was implemented in September 2013.

tion are outlined below: For technical reasons, a capital reduction was implemented The remaining activities will be limited to Denmark, Sweden, Poland and the Czech Republic. •

before the capital increase, whereby the denomination of all shares was written down from DKK 15 to DKK 1. The capital

TK Development’s activities in Germany, Finland and

reduction amounted to DKK 588.9 million, which was allocated

the Baltic States are being discontinued, and the

to a special fund under equity. Subsequently, this special fund

phase-out is progressing satisfactorily. The German

can only be used following a resolution to this effect at a Gen-

activities have been downscaled through the sale of

eral Meeting.

investment properties. In the Baltic States, a conditional agreement has been concluded regarding the sale

The capital increase was implemented by issuing 56,087,620

of the Group’s retail park project DomusPro in Vilnius,

new shares of nominally DKK 1 at a price of DKK 4.11, thus

which will be handed over to the buyer upon comple-

yielding gross proceeds of DKK 230.5 million. The net proceeds

tion of construction. The branch offices in Berlin, Ger-

after costs totalled DKK 218.6 million.

many, and Helsinki, Finland, have been closed down, and the employees have been dismissed.

A substantial portion of the proceeds from the capital increase has been used to reduce the debt to credit institutions, as well

The portfolio of projects not initiated (plots of land) is to be

as project finance loans of DKK 68.5 million granted by a num-

reduced from about DKK 1.1 billion to about DKK 500 million.

ber of the Company’s major shareholders and members of Man-

This process is progressing satisfactorily and accor-

agement.

ding to plan. Other financial issues The balance sheet is to be adjusted, with a solvency ratio of about 40 %. •

The fact that a number of completed projects have not been sold means a substantial portion of the Group’s financial re-

After implementing the capital increase in September

sources is tied up in these projects. The sale of completed proj-

2013, the Group has met this strategic goal. The sol-

ects will free up the cash resources essential for strengthening

vency ratio amounted to 39.8 % at 31 October 2013.

the Group’s financial platform. Moreover, financial resources will be secured to regenerate momentum and thus to realize

Overheads are to be reduced by around 20 % relative to 2012/13, with half of the reduction deriving from the

the development potential inherent in several of the Group’s projects.

discontinuation of activities in Germany, Finland and the Baltic States. •

Planned projects are initiated once the commercial conditions

Cost-reducing measures have been implemented and

for starting construction have been met and partial or full fi-

are expected to achieve full impact in the course of

nancing of the project has been procured, either from credit

1 0 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


R E S U LT S I N Q 1 - Q 3 2 0 1 3 / 1 4 A N D O U T L O O K F O R 2 0 1 3 / 1 4

institutions or from investors in the form of forward funding.

SUBSEQUENT EVENTS

Project startup is also contingent on the provision of any equity

No major events affecting the Company other than those men-

financing by means of TK Development’s own financial resourc-

tioned in the Management Commentary have occurred after

es, with due consideration for the liquidity covenants adopted

the reporting date.

by 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 prior to 31 January 2014. 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.

O U T L O O K FO R 2 0 1 3 / 1 4 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.

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 1 1 / 3 6


MARKET CONDITIONS

In Management’s opinion the Group’s markets are showing

In the residential segment in Warsaw, Poland, the Group is ex-

signs of recovery. Consumer confidence is rising generally, and

periencing rising demand for housing and regularly concludes

expectations for financial growth in the Group’s markets are

agreements for the sale of apartments in its completed res-

mounting, although varying from country to country.

idential project in Bielany. The volume of projects initiated dropped for a period, which has stabilized the supply of housing

However, uncertainty in the Group’s markets is greater than

for sale. The total volume of housing for sale currently exceeds

usual during this economic growth phase of the business cy-

the supply of new housing, which has led to slightly increasing

cle, rendering the property markets somewhat precarious and

prices for attractive housing. In the opinion of Management,

leading to consistently long decision-making processes among

housing development in Poland has become attractive again,

investors, tenants and financing sources in the individual coun-

particularly in the Warsaw area.

tries. 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. Investors are showing growing optimism and interest in investing in selected segments of retail projects, with location and returns being key factors in the investment decision. In Denmark foreign investors are showing mounting interest in investing in properties in major towns and cities, with Copenhagen being the preferred location. However, the decision-making processes continue to be lengthy, in part because of the investors’ requirement for lower project risk. Institutional investors, including pension funds, need options for placing their funds and are taking a greater interest in property investments, including making contributions to project funding and subsequently acquiring ownership interests. This paves the way for setting up partnerships with such investors for the purpose of cooperating on the execution of new projects. These opportunities fall in line with the Group’s business model, according to which TK Development wishes to enter into partnerships regarding completed properties and new development projects, and thus to improve the allocation of the Company’s equity, diversify risks and better utilize the Group’s development competencies. In the letting market for retail property, tenants continue to focus on location. The rental level for prime-location projects is expected to remain fairly stable in the period ahead. TK Development is experiencing a good amount of interest in prime-location projects, and several strong national and international retail chains are expanding again. The interest shown by tenants in secondary locations is relatively slack, and the rental level for such locations is expected to remain under pressure.

1 2 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


PROPERTY DEVELOPMENT

The Group’s primary business area is the development of real property, termed property development.

The development potential of the project portfolio represented 434,000 m² at 31 October 2013, of which sold projects accounted for 21,000 m² and remaining projects for 413,000 m². The project portfolio had a total development potential of 452,000 m² at 31 January 2013.

Strategy for business area – Property development Developing projects from the conceptual phase through to project completion, based on one of several models:

The development in the Group’s project portfolio is outlined be-

Sold projects (forward funding/forward purchase)

low:

Projects with partners

On TK’s own books based on a high degree of confidence in the

31 Jan

31 Jan

31 Oct

2012

2013

2013

Completed

0

15

3

In progress

17

17

26

DKKm

letting and sales potential •

Sold

Services for third parties.

Property development Countries:

Denmark, Sweden, Poland

Not initiated

10

6

0

Total

27

38

29

and the Czech Republic Revenue: Gross profit/loss:

Q1-Q3 2013/14: DKK 174.2 million

Remaining

(Q1-Q3 2012/13: DKK 78.3 million)

Completed

0

38

8

Q1-Q3 2013/14: DKK 24.7 million

In progress

286

198

205

(Q1-Q3 2012/13: DKK -115.2 million) Balance sheet total:

31 October 2013: DKK 1,257.3 million (31 January 2013: DKK 1,284.5 million)

In its property development segment, TK Development focuses on executing existing projects in the portfolio, as well as on securing robust pre-construction letting or sales. In addition, the Group continuously works on new project opportunities.

Not initiated

938

901

908

Total

1,224

1,137

1,121

Net project portfolio

1,251

1,175

1,150

293

370

0

1,544

1,545

1,150

91.6 %

91.1 %

0.0 %

Forward funding Gross project portfolio Forward funding in % of gross carrying amount of sold projects

Planned projects are initiated once the commercial conditions

Table 1

for starting construction have been met and partial or full fi-

By means of forward funding, the Group reduces the funds tied

nancing of the project has been procured, either from credit

up in the portfolio of sold projects. Forward funding has fallen

institutions or from investors in the form of forward funding.

since 31 January 2013 due to the handover of projects to in-

Project startup is also contingent on the provision of any equity

vestors.

financing by means of TK Development’s own financial resources, with due consideration for the liquidity covenants adopted

The development potential of the Group’s project portfolio is

by Management.

shown below (in square metres):

The gross margin for development activities amounted to DKK

31 Jan

31 Jan

31 Oct

2012

2013

2013

Completed

0

4

0

In progress

7

3

21

m² (’000)

24.7 million for the first nine months of 2013/14 against DKK Sold

-115.2 million in the same period of 2012/13. The Group’s retail projects on which construction is already ongoing or about to start are still attracting a good amount of interest from tenants. During the period under review, the Group also concluded lease agreements for several of these projects.

Not initiated

29

0

0

Total

36

7

21

Remaining Completed

0

3

1

Moreover, agreements regarding the letting and sale of several

In progress

39

20

21

minor retail projects have been concluded. The earnings from

Not initiated

560

422

391

these sales are expected to be recognized in the 2014/15 fi-

Total

599

445

413

Total project portfolio

635

452

434

50

37

36

nancial year upon handover of the projects to the investors.

Number of projects Table 2

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 1 3 / 3 6


PROPERTY DEVELOPMENT

Geographical segmentation of the development potential in square metres: Denmark Czech Republic

Sweden Poland

Project outline The outline below lists the key projects in the portfolio in the property development segment. Construction TKD’s Project

TKD’s start/

share of

ownership expected con-

area (m2)

interest struction start

Opening/ expected opening

City/town

Country Segment

Warsaw

PL

Residential/services

underground car park

Copenhagen

DK

Underground car park

Vasevej

Birkerød

DK

Mixed

3,400

Ahlgade

Holbæk

DK

Mixed

1,550

Barkarby Gate, retail park

Stockholm

SE

Retail

20,000

Shopping centre, Frýdek Místek

Frýdek Místek CZ

Retail

1,480

BROEN, shopping centre

Esbjerg

DK

Retail

29,800

Østre Teglgade

Copenhagen

DK

Office/residential

32,700

Amerika Plads, lot C

Copenhagen

DK

Mixed

6,500

50 % 2014

2016

Amerika Plads, lot A

Copenhagen

DK

Office

5,900

50 % 2014

2016

Aarhus South, phase II

Aarhus

DK

Retail

2,800

100 % 2014

2015

Ejby Industrivej

Copenhagen

DK

Office

12,900

100 % -

-

Østre Havn/Stuhrs Brygge

Aalborg

DK

Mixed

36,000

Retail park, Marsvej

Randers

DK

Retail

4,700

Development of town centre

Køge

DK

Mixed

The Kulan commercial district

Gothenburg

SE

Retail park, Söderhamn

Söderhamn

Retail park, Gävle, phase II Shopping centre, Jelenia Góra

Completed Residential park, Bielany, phase I

1,150

100 % Mid-2011

January 2013

In progress Amerika Plads, 16,000

50 % 2004 100 % 50 % October 2013 100 % August 2013 10 % Autumn 2013

Continuously Autumn 2014 Autumn 2014 End-2014

Not initiated 100 % 1) 100 % Continuously

1) 50 % Continuously

Continuously

Continuously

100 % Mid-2014

2015

26,500

100 % 2014

Continuously

Mixed

45,000

100 % 2014

2016

SE

Retail

10,000

100 % 2014

2015

Gävle

SE

Retail

15,800

100 % Continuously

Continuously

Jelenia Góra

PL

Retail

7,320

remaining phases

Warsaw

PL

Residential/services

48,350

100 % Continuously

Continuously

Bytom Retail Park

Bytom

PL

Retail

25,800

100 % Continuously

Continuously

Most Retail Park, phase II

Most

CZ

Retail

100 % -

-

30 % Early 2014

End-2015

Residential park, Bielany,

Property development, total floor space 1)

2,000 approx. 356,000

Share of profit on development amounts to 70 %.

1 4 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


PROPERTY DEVELOPMENT

COMPLETED PROJECTS

managed by Cordea Savills. The sale is based on forward fund-

Residential park, Bielany, Warsaw, Poland

ing. Construction started in August 2013 and is progressing as

TK Development owns a tract of land in Warsaw allowing for

planned. The opening has been scheduled for autumn 2014.

the construction of about 56,200 m², distributed on 900-1,000

Earnings from the sale will be recognized in 2014/15 upon han-

residential units. The plan is to build the project in four phases.

dover of the project to the investor.

Construction of the first phase of 7,850 m², consisting of 136 units, was completed in January 2013. 93 % of the first-phase

Shopping centre, Frýdek Místek, Czech Republic

units (Q2 2013/14: 88 %) have been sold. The residential units

In the third quarter of 2013/14 TK Development sold 80 % of

are being sold as owner-occupied apartments to private users,

a planned shopping centre project in the Czech town of Frýdek

and 84 % (Q2 2013/14: 61 %) of the units had been handed

Místek to a business partner. Following the sale, TK Develop-

over to the buyers at 31 October 2013. Management expects

ment currently holds an ownership share in the project of 10

the remaining units to be sold in the course of the next three

%. The shopping centre will consist of about 60 retail stores.

or four months.

TK Development will receive fee income for letting and managing the construction of the project and related services. The

PROJECTS IN PROGRESS

current occupancy rate is 82 % (Q2 2013/14: 80 %), and lease

Amerika Plads, underground car park, Copenhagen, Denmark

agreements have been concluded with such tenants as Billa,

Kommanditaktieselskabet Danlink Udvikling (DLU), which is

Intersport, H&M, NewYorker and Euronics. Construction started

owned 50/50 by Udviklingsselskabet By og Havn I/S and TK

in autumn 2013, and the opening is scheduled for the end of

Development, owns three projects at Amerika Plads: lot A, lot C

2014.

and an underground car park. Part of the underground car park in the Amerika Plads area has been built. The Group expects to

P R O J E C T S N O T I N I T I AT E D

sell the total parking facility upon final completion. For a de-

BROEN, shopping centre, Esbjerg, Denmark

scription of Amerika Plads, lots A and C, please see the section

In Esbjerg, TK Development owns a plot earmarked for a shop-

“Projects not initiated” below.

ping centre project, BROEN, of about 29,800 m², to be built at Esbjerg Station. The shopping centre is expected to com-

Vasevej, Birkerød, Denmark

prise about 70 stores. The current occupancy rate is 72 %

TK Development owns a property of almost 3,000 m² at Va-

(Q2 2013/14: 72 %), with tenants including H&M, Kvickly, Aldi,

sevej in Birkerød, rented by SuperBest. The project consists of

Imerco, Skoringen, Sport-Master, Bahne, Panduro Hobby, Kong

a refurbishment of the existing property and a minor extension

Kaffe, Gina Tricot and Fitness World. TK Development is in di-

comprising a few stores and dwellings.

alogue with a potential investor about the sale of a project share. Preparatory construction works have been initiated, but

Ahlgade, Holbæk, Denmark

the project must undergo a special validation and approval pro-

TK Development owns 50 % of the shares in a company that

cess to ensure safe railway operations, etc., which will post-

is developing an approx. 3,100 m² residential and retail project

pone the startup of construction.

in Holbæk. The residential section has a floor space of about 1,900 m² and was conditionally sold to a housing association in

Østre Teglgade, Copenhagen, Denmark

the period under review. The residential section has been hand-

TK Development owns an attractively located project area at

ed over to the investor after the reporting date. The commer-

Teglholmen of about 32,700 m². Current plans involve estab-

cial section has premises of about 1,200 m², which have been

lishing a church and possibly a residential care facility in part of

partly let. Efforts are being made to let the remaining part of

the project area. Discussions are also being held with an inter-

the commercial section. Construction started in October 2013,

ested party regarding the construction of residential property

and the opening is scheduled for autumn 2014.

in the area.

Barkarby Gate, retail park, Stockholm, Sweden

Amerika Plads, lots A and C, Copenhagen, Denmark

In Barkarby in the northwestern part of Stockholm, TK Develop-

Kommanditaktieselskabet Danlink Udvikling (DLU), which is

ment is developing a 20,000 m² retail park expected to consist

owned 50/50 by Udviklingsselskabet By og Havn I/S and TK

of 12 to 14 units, of which 9 to 10 will be retail stores. The

Development, owns three projects at Amerika Plads: lot A, lot

current occupancy rate is 82 % (Q2 2013/14: 73 %), and lease

C and an underground car park. A building complex with about

agreements have been concluded with various major tenants,

11,800 m² of office space is to be built on lot A, and a building

including XXL (sports store), Clas Ohlson, Intersport, Lager 157,

complex with about 13,000 m² of commercial and residential

Grizzly, Kjell & Co., Burger King, Pizza Hut and the fitness chain

space on lot C. Construction will take place as the space is let.

Nordic Wellness. In June 2013 the project was sold to a fund

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 1 5 / 3 6


PROPERTY DEVELOPMENT

Østre Havn/Stuhrs Brygge, Aalborg, Denmark

The Kulan commercial district, shopping centre and service/

In the area previously occupied by Aalborg Shipyard at Stuhrs

commercial space, Gothenburg, Sweden

Brygge, TK Development is developing a business and residen-

TK Development and the Swedish housing developer JM AB

tial park of about 72,000 m² through a company jointly owned

have entered into a cooperation agreement with SKF Sverige AB

with Frederikshavn Maritime Erhvervspark on a 50/50 basis.

to develop SKF’s former factory area in the old part of Gothen-

The area was acquired by the jointly owned company, with pay-

burg. The contemplated project comprises a total floor space

ment being effected for the development rights acquired in

of about 75,000 m²: 30,000 m² for a shopping centre, 15,000

step with the development and execution of specific projects.

m² for services/commercial use and 30,000 m² for housing. TK

TK Development has entered into a conditional lease agree-

Development will be in charge of developing the 45,000 m² for

ment with Alfa Laval regarding the construction of office prem-

a shopping centre, services and commercial facilities, while JM

ises of about 6,100 m² in part of the area. This project can be

AB will have responsibility for the 30,000 m² of housing. The

executed within the framework of the existing local plan, and

local plan is currently being prepared, a process that is taking

construction is expected to commence in spring 2014. In addi-

longer than anticipated. The local plan is now expected to be

tion, a new local plan comprising about 31,000 m² of housing,

approved in mid-2014 rather than in 2013, as previously envis-

offices and parking facilities has been launched.

aged. The project is being discussed with potential tenants, and a number of lease agreements have been concluded.

Retail park, Marsvej, Randers, Denmark In October 2010 the Group took over a plot of land on Marsvej

Retail park, phase II, Gävle, Sweden

in Randers, intended for a retail development project of 4,700

In 2012/13 TK Development sold and handed over a retail park

m². Letting has been initiated, and there is a satisfactory level

of about 8,300 m² in the Swedish town of Gävle to the Swedish

of interest among potential tenants.

property company Nordika Fastigheter AB. Moreover, TK Development has an option to buy a plot of land for developing addi-

Development of town centre, Køge, Denmark

tional retail park premises of about 15,800 m².

TK Development is working on a potential project in Køge. In February 2012 Køge Kyst and TK Development entered into a

Shopping centre, Jelenia Góra, Poland

conditional agreement under which TK Development is to buy

TK Development has bought a plot of land in Jelenia Góra

land for constructing a project of about 26,500 m². The project,

and has an option on additional land for the development of

to be built immediately next to Køge Station and the town cen-

a shopping centre of about 24,400 m². The project will com-

tre shopping area, comprises retail stores of about 11,500 m²,

prise a supermarket of about 2,200 m² and retail, restaurant

public service facilities of about 8,700 m² including a town hall

and service premises totalling about 22,200 m². A building per-

and rehabilitation centre, residential premises of about 3,300

mit has been granted for the project. Letting is ongoing, and

m² and office premises/fitness facilities of about 2,900 m² as

lease agreements for almost 50 % of the floor space have so

well as an underground car park of about 14,000 m². The local

far been signed. The tenants include Intermarché, H&M, CCC,

plan was adopted in June 2013. TK Development expects to

Reserved and Bershka. Construction is expected to start in ear-

enter into an agreement with Køge Municipality regarding the

ly 2014, and the shopping centre is scheduled to open in late

municipality’s takeover of both town hall and rehabilitation

2015. In December 2012 70 % of the project was handed over

centre. Letting of the retail premises has started, and potential

to Heitman, and in this connection the Group’s 30 % ownership

tenants are showing a good amount of interest in the project.

interest was classified under “Investment properties under construction”. TK Development will receive fee income from the

The plan is to build the project in phases. The first phase will

jointly owned company established for developing, letting and

comprise about 2,500 m² of retail premises, of which about

managing the construction of the project.

2,000 m² has been let to supermarket operators, an approx. 5,400 m² rehabilitation centre to the municipality and about

Residential park, Bielany, Warsaw, Poland

5,600 m² of the approx. 14,000 m² projected underground car

TK Development owns a tract of land in Warsaw allowing for

park to EuroPark. Construction is expected to start in 2014

the construction of residential units of about 56,200 m² in all;

once the construction contract with a contractor is in place.

see above under “Completed projects”. Construction of the first phase of 7,850 m² has been completed. The plan is to initiate construction of the remaining approx. 48,350 m² in three successive phases in continuation of the completion of the first phase and once pre-construction sales have reached a satisfactory level. A building permit for the second phase of the project, consisting of about 300 residential units and service

1 6 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


PROPERTY DEVELOPMENT

facilities, has been granted. The pre-construction sale of the units started in December 2013. Bytom Retail Park, Bytom, Poland TK Development intends to develop a retail park with total leasable space of about 25,800 m² on its site at the Plejada shopping centre in Bytom, which is centrally located in the Katowice region. Construction of the project will be phased in step with letting. Letting efforts are ongoing, and construction will start as space is let.

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 1 7 / 3 6


ASSET MANAGEMENT

The Group’s secondary business area is asset management,

The gross margin for asset management activities amount-

which consists of owning, operating, running in, maturing and

ed to DKK 89.0 million for the first nine months of 2013/14

optimizing completed projects for a medium-long operating pe-

against DKK -55.3 million in the same period of 2012/13.

riod whose length matches the potential for adding value. Although these properties have been classified under asset Strategy for business area – Asset management

management, TK Development will focus on selling them in

Owning, operating, maturing and optimizing completed projects for

whole or in part, as their sale will substantially strengthen

a medium-long operating period that matches the potential for add-

the Group’s financial platform. Therefore, the process of

ing value.

selling several of the Group’s completed projects continues. Management anticipates being able to conclude final sales agreements for one or more of these properties within a

Asset management Countries:

short period of time.

Denmark, Sweden, Poland and the Czech Republic

Revenue:

The total portfolio of properties under asset management

Q1-Q3 2013/14: DKK 102.2 million

amounted to DKK 1,943.6 million at 31 October 2013 (31

(Q1-Q3 2012/13: DKK 114.8 million) Gross profit/loss:

July 2013: DKK 1,939.0 million), of which investment prop-

Q1-Q3 2013/14: DKK 89.0 million

erties accounted for DKK 314.7 million (31 July 2013: DKK

(Q1-Q3 2012/13: DKK -55.3 million) Balance sheet total:

314.4 million). The operation of these properties, which

31 October 2013: DKK 2,102.5 million

largely consist of shopping centres, is generally proceeding

(31 January 2013: DKK 2,100.7 million) Number of employees at centres:

satisfactorily. The annual net rent from the current leases

31 October 2013: 13

corresponds to a return on the carrying amount of 6.7 % (Q2

(31 January 2013: 12)

2013/14: 6.7 %). Based on full occupancy, the return on the

Breakdown of own properties under asset management by

carrying amount is expected to reach 7.9 % (Q2 2013/14:

country (carrying amount):

7.9 %).

Denmark

Overall the individual centres recorded favourable development in 2012, with the positive trend in revenue continuing in 2013, but the footfall is showing signs of decline at a few

Poland

centres. The development of the individual centres appears from

Czech Republic

pages 20-22.

The Group’s own properties under asset management comprise the following nine properties: TKD’s ownership Project

Country

Type

interest

Project area (m2)

Investment properties Futurum Hradec Králové

Czech Republic

Shopping centre

20 %

28,250

Galeria Tarnovia, Tarnów

Poland

Shopping centre

30 %

16,500

Sillebroen, Frederikssund

Denmark

Shopping centre

100 %

25,000

Fashion Arena Outlet Center, Prague

Czech Republic

Outlet centre

75 %

25,000

Galeria Sandecja, Nowy Sącz

Poland

Shopping centre

100 %

17,300

Ringsted Outlet

Denmark

Outlet centre

50 %

13,200

Most Retail Park

Czech Republic

Retail park

100 %

6,400

Aabenraa

Denmark

Retail park

100 %

4,200

Brønderslev

Denmark

Shopping-street property

100 %

Other completed projects

Total

1 8 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary

2,400 138,250


ASSET MANAGEMENT

Generally, TK Development’s properties have a satisfactory letting status, and the current occupancy rates are: 100 %

Futurum Hradec Králové Galeria Tarnovia, Tarnów

94 %

Sillebroen, Frederikssund

91 %

Fashion Arena Outlet Center, Prague

96 %

Galeria Sandecja, Nowy Sącz

96 %

Ringsted Outlet

61 %

Most Retail Park Aabenraa, retail park Brønderslev, shopping-street property

91 % 71 % 93 %

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 1 9 / 3 6


ASSET MANAGEMENT

FUTURUM HRADEC KRÁLOVÉ, CZECH REPUBLIC Opening Leasable area Occupancy rate Footfall 2012

November 2000/May 2012 28,250 m² 100 % (Q2 2013/14: 100 %)

Major tenants: Cinestar, Tommy Hilfiger, H&M, New Yorker, Adidas, Reserved, Intersport, Takko Fashion, Foot Locker, Gant, C & A, Lindex, Datart.

5.6 million

In 2012 an extension of almost 10,000 m² was added to the shopping centre, and the existing centre was also modernized. The number of retail stores now totals 110. The shopping centre is fully let and continues to have a satisfactory occupancy rate, operating profit and customer influx. Both the revenue and the footfall for the shopping centre have shown an increasing trend in 2013 relative to 2012.

G A L E R I A TA R N O V I A , S H O P P I N G C E N T R E , TA R N Ó W , P O L A N D Opening Leasable area Occupancy rate Footfall 2012

November 2009 16,500 m², including a supermarket of about 2,000 m²

Major tenants: H&M, New Yorker, Euro RTV AGD, Reserved, Deichmann, Douglas, Rossmann, Stradivarius, Takko Fashion, Simply Market.

94 % (Q2 2013/14: 94 %) 1.8 million

The shopping centre’s footfall has shown an increasing trend during the first ten months of the year compared to the same period last year. The revenue is on a par with the previous year. TK Development’s focus is on enhancing the centre’s attraction value, and current initiatives are aimed at bolstering occupancy and customer influx, among other things.

SILLEBROEN, SHOPPING CENTRE, FREDERIKSSUND, DENMARK Opening Leasable area Occupancy rate Footfall 2012

March 2010 25,000 m², including about 5,000 m² of supermarket units 91 % (Q2 2013/14: 92 %)

Major tenants: Kvickly, Fakta, H&M, Fona, Gina Tricot, Matas, Sport-Master, Frederikssund Isenkram, Deichmann, Vero Moda, Designersmarket, Wagner, Frederikssund Apotek, Tøjeksperten, Skoringen, Companys, Bog & Idé, Café Vivaldi.

3.0 million

In the continuing difficult economic climate with subdued private consumption, the centre’s footfall and revenue have shown a slightly declining trend compared to 2012. Tenants are regularly replaced and newcomers move in to optimize the centre. In spring 2013, both Gina Tricot and Signal opened outlets in the centre, and the most recent newcomers are Sisters Point and Tippy. Negotiations with tenants for several of the remaining rental units are ongoing. The centre is still being run in and matured, and continued efforts are being made to position the centre on the market. TK Development’s focus is on strengthening the occupancy and revenue levels for the centre.

2 0 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


ASSET MANAGEMENT

FA S H I O N A R E N A O U T L E T C E N T E R , P R A G U E , C Z E C H R E P U B L I C

Opening Leasable area Occupancy rate Footfall 2012

November 2007/October 2010

Major tenants: Tommy Hilfiger, Nike, Adidas, Benetton, Tom Tailor, Ecco, Gant, Lacoste, Levi Strauss & Co., Esprit.

25,000 m² 96 % (Q2 2013/14: 96 %) 2.2 million

In recent years the Fashion Arena Outlet Center has truly distinguished itself as one of the most successful outlet centres in Central Europe. Since the opening of the second phase in 2010, the outlet centre has recorded a highly positive development in footfall and revenue. The outlet centre’s revenue rose by about 24 % in 2012 compared to 2011, and the positive trend has continued in the past months this year.

GALERIA SANDECJA, SHOPPING CENTRE, NOWY SĄCZ, POLAND Opening Leasable area Occupancy rate Footfall 2012

October 2009 17,300 m², including a hypermarket of about 5,000 m²

Major tenants: Carrefour, H&M, New Yorker, Reserved, Deichmann, Douglas, Camaieu, Carry, Euro RTV AGD.

96 % (Q2 2013/14: 97 %) 2.4 million

The operation of Galeria Sandecja is still proceeding satisfactorily. During the first ten months of 2013, the shopping centre’s revenue and footfall increased compared to the same period of 2012. The increasingly competitive environment in the town has prompted TK Development to focus on initiatives to maintain and continue the expansion of business experienced to date. Consistent attempts are being made to let any vacant premises under temporary leases to boost the activity level and dynamics in the centre, and thus ensure full occupancy.

R I N G S T E D O U T L E T, R I N G S T E D , D E N M A R K Opening Leasable area Occupancy rate Footfall 2012

March 2008 13,200 m² 61 % (Q2 2013/14: 62 %)

Major tenants: Hugo Boss, Nike, Puma, Diesel, G-Star Raw, Redgreen, Ticket to Heaven, McDonald’s, Superdry, Le Creuset, Levi’s, Sparkz, Samsøe & Samsøe, Rosendahl, Noa Noa, Helly Hansen, Saint Tropez, Asics, Envii, Signal.

1.1 million

After a long running-in period, Ringsted Outlet has recorded pleasing progress in the past two years. Despite the difficult letting situation and intensified competition in the Danish retail trade sector, in 2012 Ringsted Outlet recorded the highest number of visitors and the highest revenue since its opening. However, the 25 % growth in revenue should be viewed in light of the centre’s relatively low revenue the year before. Lease agreements have been concluded with several new tenants, and a number of new stores have opened for business in 2013, including Superdry, Saint Tropez, Envii, Mio my Mio and, most recently Haglöfs, which opened an outlet in the centre in October 2013. In terms of revenue and footfall, the centre has continued the positive development from 2012 in the first nine months of 2013.

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 2 1 / 3 6


ASSET MANAGEMENT

M O S T R E TA I L PA R K , C Z E C H R E P U B L I C

TK Development is developing a retail park of about 8,400 m² in the Czech town of Most, to be built in phases. The first phase of about 6,400 m² opened in April 2009, and the current occupancy rate for this phase is 91 % (Q2 2013/14: 91 %). One vacant rental unit remains, and efforts are being made to let this unit. Management believes the vacant rental unit should be let before the project can be sold.

R E TA I L P A R K , A A B E N R A A , D E N M A R K

TK Development built a retail park of approx. 4,200 m² in Aabenraa in 2009. In Q2 2013/14 the retail park’s occupancy rate declined from 100 % to 71 % (Q2 2013/14: 71 %) after Biva went bankrupt and vacated its premises. The tenants in the retail park are jem & fix, Petworld, T. Hansen and Sport24. Discussions with potential tenants for the vacant unit are ongoing.

S H O P P I N G - S T R E E T P R O P E R T Y, B R Ø N D E R S L E V, D E N M A R K

TK Development has developed retail stores of about 2,400 m2 in the former Føtex property at Mejlstedgade in Brønderslev. Premises have been let to Deichmann, Fitness World and Intersport. The current occupancy rate is 93 % (Q2 2013/14: 93 %).

2 2 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


DISCONTINUING ACTIVITIES

As described previously, Management has chosen a market

man activities.

focus that targets the countries expected to contribute with long-term, profitable operations in future. This means that the

The value of these properties totalled DKK 111.7 million at 31

Group will phase out its activities in Finland, Germany, the Bal-

October 2013 (31 July 2013: DKK 155.4 million). The valuation

tic States and Russia. The phase-out, which will result in office

of the properties is based on a return requirement of 6.5 % p.a.

closures and employee dismissals, will be carried out as soon

calculated on the basis of a discounted cash-flow model over

as possible, while taking into account that all the countries in

a ten-year period and recognition of the terminal value in year

question have projects that need to be handled so as to retain

ten.

as much of the value of the existing portfolio as possible. The Company’s branch offices in Berlin, Germany, and Helsinki, Fin-

In addition to these investment properties, the Group owns a

land, closed down in the third quarter of 2013/14, and the em-

share of a minor shopping centre and a few plots of land.

ployees in these countries have been dismissed. The employees left their positions at the end of September Discontinuing activities Countries:

2013, and the branch office has closed down. Germany, Finland, Lithuania, Latvia and Russia

Revenue: Gross profit/loss:

The Group’s activities in Finland are fairly limited and, apart from

(Q1-Q3 2012/13: DKK 10.9 million)

a few project opportunities, comprise the projects listed below.

Q1-Q3 2013/14: DKK -1.8 million (Q1-Q3 2012/13: DKK -21.2 million)

Balance sheet total:

FINLAND

Q1-Q3 2013/14: DKK 9.1 million

31 October 2013: DKK 374.7 million (31 January 2013: DKK 425.4 million)

Number of employees:

31 October 2013: 3 (31 January 2013: 11)

Floor space Project

City/town

Segment

Pirkkala Retail Park, phase II

Tammerfors

Retail

5,400

(m²)

Kaarina Retail Park

Turku

Retail

6,600

Efforts are still being made to phase out the activities as quick-

For the first nine months of 2013/14, results before tax of the

ly as possible, and Management expects to wind up the remain-

discontinuing activities amounted to DKK -13.5 million against

ing activities in the course of spring 2014 rather than in the

DKK -33.7 million in the same period of 2012/13. The value

course of 2013/14, as previously envisaged. The employees

adjustments of the German investment properties amounted

have left their positions, and the branch office closed down on

to DKK -1.0 million in the first nine months of 2013/14 against

31 October 2013.

DKK -8.2 million in the same period the year before. At 31 October 2013 the balance sheet total for the discontinuing activ-

B A LT I C S TAT E S

ities amounted to DKK 374.7 million against DKK 425.4 million

The Group’s Baltic activities comprise the following projects:

at 31 January 2013, a decline of 11.9 %. DomusPro Retail Park

Floor space

in Vilnius accounted for DKK 78.9 million of the balance sheet

Project

City/town

Segment

total at 31 October 2013. The results before tax of the discon-

DomusPro Retail Park

Vilnius (LT)

Retail

11,100

tinuing activities, DKK -13.5 million, included impairment losses

Milgravja Street

Riga (LV)

Residential

10,400

on the project portfolio of DKK 3.4 million.

Ulmana Retail Park

Riga (LV)

Retail

12,500

(m²)

GERMANY

DomusPro Retail Park, Vilnius, Lithuania

In September 2013 TK Development entered into an agree-

TK Development owns a plot of land in Vilnius reserved for

ment regarding the sale of yet a German investment property,

building an 11,100 m² retail park. The project has been condi-

which was handed over to the buyer at the end of September

tionally sold to BPT Baltic Opportunity Fund, which is managed

2013. The selling price of DKK 43.8 million equals the carrying

by BPT Asset Management. The project will be handed over

amount.

to the buyer once the usual commercial conditions have been met, including those relating to project construction and let-

Following the sale of a residential rental property in June 2013

ting. The selling price is based on a return requirement of 8.5

and the above-mentioned sale in September 2013, the Group

%. The retail park will be built in phases. Construction of the

now has two investment properties left in Germany. These

first phase of about 7,500 m² started in August 2013 and is

properties consist of a combined commercial and residential

progressing as planned. The opening is scheduled for spring

rental property in Lüdenscheid in western Germany and one

2014. TK Development is engaged in constructive dialogue with

residential rental property on the outskirts of Berlin. Manage-

potential tenants, and 81 % of the first-phase premises have

ment considers it essential to continue downscaling the Ger-

been let, with supermarket operator RIMI as the anchor tenant.

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 2 3 / 3 6


DISCONTINUING ACTIVITIES

Construction of the second phase will start once a satisfactory occupancy level has been reached. Efforts are being made to phase out the remaining activities in the Baltic States as quickly as possible, with due consideration paid to retaining the maximum possible value of the existing portfolio. Management anticipates that the phase-out of the activities will continue into the next financial year.

RUSSIA The Group owns a minor project in Moscow, consisting of Scandinavian-style dwellings that are used for rental, mainly to international company employees stationed in Moscow. Efforts will be made to sell this project.

2 4 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | M anagement commentary


O T H E R M AT T E R S

T R A N S A C T I O N S W I T H R E L AT E D PA R T I E S During the first nine months of 2013/14, TK Development made interest payments on project finance loans granted by a number of major shareholders, including members of Management. In September 2013 TK Development repaid these project finance loans out of the proceeds from the capital increase implemented. Apart from this, no significant or unusual transactions were made with related parties. As regards transactions with related parties, reference is made to note 7 in the Interim Report.

F I N A N C I A L TA R G E T S To provide for sufficient future financial resources, liquidity targets have been formulated for the whole Group. Moreover, Management has adopted a target solvency ratio of about 40 % at group level, calculated as the ratio of equity to total assets. The Group has undertaken a commitment towards its main banker to meet a liquidity target and a solvency target. Both targets were met during the period under review.

A D J U S T M E N T O F WA R R A N T S As a consequence of the capital reduction and capital increase implemented in 2013, the Board of Directors resolved, in accordance with the Company’s Articles of Association, to adjust the number of warrants allocated to the Company’s Executive Board and other executive staff members as well as the subscription price for exercising the warrants. The adjustment was made to ensure that the value of the warrants for the employees will be maintained after implementation of the above-mentioned alterations to TK Development’s capital structure. The adjustment means that the employees will be allotted a number of additional warrants, and that the subscription price upon exercise of the warrants will be reduced. Reference is also made to company announcement no. 26/2013.

O T H E R M AT T E R S For a more detailed review of other matters relating to the Group, including risk issues, reference is made to the Group’s Annual Report for 2012/13, which is available at the Company’s website: www.tk-development.com

M anagement commentary | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 2 5 / 3 6


S TAT E M E N T B Y T H E B O A R D O F D I R E C T O R S A N D E X E C U T I V E B O A R D O N T H E I N T E R I M R E P O R T

The Board of Directors and Executive Board have today consid-

Moreover, we consider the Management’s review to give a fair

ered and adopted the Interim Report of TK Development A/S

presentation of the development in the Group’s activities and

for the period from 1 February to 31 October 2013.

financial affairs, the results for the period and the Group’s overall financial position, as well as a true and fair description of

The Interim Report, which has not been audited or reviewed by

the most significant risks and elements of uncertainty faced

the Company’s auditors, is presented in accordance with IAS

by the Group.

34, Interim Financial Reporting, as adopted by the EU, and Danish disclosure requirements for listed companies. In our opinion, the Interim Report gives a true and fair view of the Group’s financial position at 31 October 2013 and of the results of the Group’s operations and cash flows for the period from 1 February to 31 October 2013.

Aalborg, 18 December 2013 EXECUTIVE BOARD

Frede Clausen

Robert Andersen

President and CEO

Executive Vice President

B OA R D O F D I R ECTO RS

Niels Roth

Peter Thorsen

Chairman

Deputy Chairman

Per Søndergaard Pedersen

Arne Gerlyng-Hansen

Kim Mikkelsen

Morten Astrup

2 6 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | S tatement by the B oard of directors and E xecutive B oard


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S I N C O M E S TAT E M E N T

DKKm

Note

Net revenue External direct project costs

2

Value adjustment of investment properties, net

Q1-Q3 2013/14

Q1-Q3 2012/13

Q3 2013/14

Q3 2012/13

Full year 2012/13

285.5

204.0

66.7

74.7

632.3

-173.3

-363.2

-31.2

-307.6

-734.0

-0.3

-32.5

-0.3

-8.2

-37.8

111.9

-191.7

35.2

-241.1

-139.5

Other external expenses

20.4

22.9

6.9

7.3

30.2

Staff costs

49.1

52.7

16.3

16.5

69.2

Total

69.5

75.6

23.2

23.8

99.4

Profit/loss before financing and depreciation

42.4

-267.3

12.0

-264.9

-238.9

1.2

1.7

0.3

0.5

2.2

41.2

-269.0

11.7

-265.4

-241.1

Income from investments in associates

1.1

1.3

0.3

0.2

2.5

Financial income

3.7

3.4

1.0

0.7

5.6

Financial expenses

-81.1

-62.1

-23.8

-21.9

-93.0

Total

-76.3

-57.4

-22.5

-21.0

-84.9

Profit/loss before tax

-35.1

-326.4

-10.8

-286.4

-326.0

4.1

147.0

-1.7

0.4

167.3

-39.2

-473.4

-9.1

-286.8

-493.3

Earnings per share (EPS) of nom. DKK 1

-0.7

-9.7

0.0

-5.9

-10.1

Diluted earnings per share (EPS-D) of nom. DKK 1

-0.7

-9.7

0.0

-5.9

-10.1

-39.2

-473.4

-9.1

-286.8

-493.3

Foreign-exchange adjustments, foreign operations

-0.5

13.5

4.6

2.7

6.1

Tax on foreign-exchange adjustments, foreign operations

-1.2

-4.9

-3.3

-0.2

-2.9

Value adjustment of hedging instruments

-2.1

2.1

-0.6

0.7

3.1

0.4

-0.4

0.1

-0.2

-0.6

-3.4

10.3

0.8

3.0

5.7

-42.6

-463.1

-8.3

-283.8

-487.6

Gross profit/loss

Depreciation and impairment of non-current assets Operating profit/loss

Tax on profit/loss for the period Profit/loss for the period

EARNINGS PER SHARE IN DKK

C O M P R E H E N S I V E I N C O M E S TAT E M E N T Profit/loss for the period Items that may be re-classified to profit/loss:

Tax on value adjustment of hedging instruments Other comprehensive income for the period Comprehensive income for the period

C onsolidated financial statements | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 2 7 / 3 6


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S BALANCE SHEET

DKKm

31 Oct 2013

31 Jan 2013

31 Oct 2012

Goodwill

33.3

33.3

33.3

Intangible assets

33.3

33.3

33.3

426.4

479.4

417.2

22.1

16.9

0.0

1.5

2.5

3.0

450.0

498.8

420.2

Investments in associates

2.5

1.7

1.2

Receivables from associates

4.6

4.6

2.5

Other securities and investments

0.8

0.8

1.5

Deferred tax assets

120.5

127.0

151.9

Other non-current assets

128.4

134.1

157.1

Total non-current assets

611.7

666.2

610.6

3,019.2

3,030.9

3,395.7

Trade receivables

77.4

73.2

63.9

Receivables from associates

19.2

19.0

18.3

3.0

4.0

5.6

105.5

122.4

115.7

Note

ASSETS Non-current assets

Investment properties Investment properties under construction Other fixtures and fittings, tools and equipment Property, plant and equipment

Current assets Projects in progress or completed

Corporate income tax receivable Other receivables Prepayments Total receivables

18.7

22.4

21.8

223.8

241.0

225.3

Securities

4.0

4.3

4.0

Deposits in blocked and escrow accounts

4

35.0

35.7

68.4

Cash and cash equivalents

4

42.5

31.2

34.1

Total current assets

3,324.5

3,343.1

3,727.5

ASSETS

3,936.2

4,009.3

4,338.1

2 8 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | C onsolidated financial statements


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S BALANCE SHEET DKKm

Note

31 Oct 2013

31 Jan 2013

31 Oct 2012

631.0

EQUITY AND LIABILITIES

Equity Share capital

5

98.2

631.0

Other reserves

6

590.8

5.3

9.9

877.2

753.4

773.2

1,566.2

1,389.7

1,414.1

108.3

102.2

45.1

0.4

2.3

4.0

29.6

35.0

38.9

Retained earnings Total equity

Liabilities Credit institutions Provisions Deferred tax liabilities Other debt

1.5

1.5

3.8

139.8

141.0

91.8

1,923.3

2,189.1

2,426.9

98.6

106.3

208.5

Corporate income tax

8.1

5.0

7.8

Provisions

9.2

13.1

6.6

177.7

150.2

167.8

Total non-current liabilities Credit institutions Trade payables

Other debt Deferred income

13.3

14.9

14.6

Total current liabilities

2,230.2

2,478.6

2,832.2

Total liabilities

2,370.0

2,619.6

2,924.0

TOTAL EQUITY AND LIABILITIES

3,936.2

4,009.3

4,338.1

C onsolidated financial statements | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 2 9 / 3 6


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S S TAT E M E N T O F C H A N G E S I N E Q U I T Y

DKKm

Share capital

Other reserves

Retained earnings

Total equity

631.0

139.8

1,105.6

1,876.4

Profit/loss for the period

0.0

0.0

-473.4

-473.4

Other comprehensive income for the period

0.0

10.3

0.0

10.3

Total comprehensive income for the period

0.0

10.3

-473.4

-463.1

Special reserve transferred to distributable reserves

0.0

-140.2

140.2

0.0

Share-based payment

0.0

0.0

0.8

0.8

Equity at 31 October 2012

631.0

9.9

773.2

1,414.1

Equity at 1 February 2013

Equity at 1 February 2012

631.0

5.3

753.4

1,389.7

Profit/loss for the period

0.0

0.0

-39.2

-39.2

Other comprehensive income for the period

0.0

-3.4

0.0

-3.4

Total comprehensive income for the period

0.0

-3.4

-39.2

-42.6

-588.9

588.9

0.0

0.0

56.1

0.0

0.0

56.1

Premium on capital increase

0.0

174.4

0.0

174.4

Costs of share issue

0.0

-11.9

0.0

-11.9

Special reserve transferred to distributable reserves

0.0

-162.5

162.5

0.0

Share-based payment

0.0

0.0

0.5

0.5

98.2

590.8

877.2

1,566.2

Capital decrease Capital increase

Equity at 31 October 2013

3 0 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | C onsolidated financial statements


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S C A S H F L O W S TAT E M E N T

DKKm Operating profit/loss

Q1-Q3

Q1-Q3

Full year

2013/14

2012/13

2012/13

41.2

-269.0

-241.1

Adjustments for non-cash items: Value adjustment of investment properties, net

0.3

32.5

37.8

Depreciation and impairment

7.4

293.8

290.1

Share-based payment

0.5

0.8

0.9

-5.6

-4.4

0.4

-13.2

4.3

7.5

Increase/decrease in investments in projects, etc.

27.9

-127.8

139.9

Increase/decrease in receivables

-9.3

41.6

22.4

0.7

-23.2

9.5

Increase/decrease in payables and other debt

19.1

59.5

-61.1

Cash flows from operating activities before net financials and tax

69.0

8.1

206.3

-95.7

-104.7

-142.9

4.7

3.6

4.3

-0.2

-23.5

-22.1

-22.2

-116.5

45.6

-0.2

-0.3

-0.2

0.1

0.3

0.4

Investments in investment properties

-7.3

-7.5

-11.3

Sale of investment properties

54.7

0.0

17.3

Purchase of securities and investments

-0.1

-0.7

-0.7

0.4

0.5

0.9

47.6

-7.7

6.4

Provisions Foreign-exchange adjustment

Changes in deposits on blocked and escrow accounts

Interest paid, etc. Interest received, etc. Corporate income tax paid Cash flows from operating activities Investments in equipment, fixtures and fittings Sale of equipment, fixtures and fittings

Sale of securities and investments Cash flows from investing activities Repayment, long-term financing

0.0

0.0

-0.7

Raising of long-term financing

0.0

12.9

13.0

Raising of project financing

25.1

122.1

149.5

-257.8

-33.2

-238.0

Capital increase

230.5

0.0

0.0

Costs of share issue

-11.9

0.0

0.0

Cash flows from financing activities

-14.1

101.8

-76.2

Cash flows for the period

11.3

-22.4

-24.2

Cash and cash equivalents, beginning of period

31.2

55.1

55.1

0.0

1.4

0.3

42.5

34.1

31.2

Reduction of project financing/repayments, credit institutions

Foreign-exchange adjustment of cash and cash equivalents Cash and cash equivalents, end of period

The figures in the cash flow statement cannot be inferred from the Consolidated Financial Statements alone.

C onsolidated financial statements | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 3 1 / 3 6


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

Page

32

Note 1. Segment information

32

Note 2. External direct project costs

33

Note 3. Share-based payment

33

Note 4. Liquidity reserves

33

Note 5. Share capital

34

Note 6. Other reserves

35

Note 7. Changes in contingent assets and contingent liabilities

35

Note 8. Transactions with related parties

35

Note 9. Financial instruments

N O T E 1 . S E G M E N T I N FO R M AT I O N The internal reporting in TK Development is split into the business units development, asset management and discontinuing activities. The segment information has been disclosed accordingly. DKKm

Development

Asset management

174.2

102.2

10.6

41.4

1,257.3

2,102.5

596.1

Development

Discontinuing activities

Unallocated

Total

9.1

0.0

285.5

-13.5

-73.6

-35.1

374.7

201.7

3,936.2

1,344.2

147.1

282.6

2,370.0

Asset management

Discontinuing activities

Unallocated

Total

31 Oct 2013 Net revenue, external customers Profit/loss before tax Segment assets Segment liabilities

DKKm

31 Oct 2012 Net revenue, external customers Profit/loss before tax Segment assets Segment liabilities

78.3

114.8

10.9

0.0

204.0

-109.1

-103.5

-33.7

-80.1

-326.4

1,364.6

2,289.8

454.3

229.4

4,338.1

798.0

1,551.4

221.1

353.5

2,924.0

N OT E 2 . E X T E R N A L D I R ECT P ROJ ECT COSTS

Q1-Q3 2013/14 Project costs Impairment losses on projects in progress or completed projects Reversal of impairment losses on projects in progress or completed projects External direct project costs, total

3 2 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | C onsolidated financial statements

Q1-Q3 2012/13

Full year 2012/13

167.0

71.0

446.1

6.3

292.2

303.5

0.0

0.0

-15.6

173.3

363.2

734.0


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

N O T E 3 . S H A R E - B A S E D PAY M E N T For a more detailed review of the Group’s incentive schemes, reference is made to the Group’s Annual Report for 2012/13. As appears, in June 2011 the Board of Directors allocated 500,000 warrants to the Executive Board and other executive staff, broken down by 62,500 warrants to each Executive Board member and 375,000 warrants to other executive staff members. After the capital reduction and capital increase implemented in September 2013, the number of warrants allocated has been adjusted by 171,461 to a total of 615,461, broken down by 173,272 to the Executive Board and 442,189 to other executive staff members. The development in outstanding warrants is shown below: 31 Oct 2013

31 Jan 2013

31 Oct 2012

Outstanding warrants, beginning of year

Number of warrants

930,315

1,707,812

1,707,812

Granted during the period

171,461

0

0

Lapsed due to termination of employment

-40,000

-16,000

0

-446,315

-761,497

-761,497

615,461

930,315

946,315

0

446,315

446,315

0.5

0.9

0.8

Expired during the period Outstanding warrants, end of period Number of warrants exercisable at the reporting date Share-based payment recognized in the profit or loss (DKK million)

N OT E 4 . L I Q U I D I T Y R E S E RV E S 31 Oct 2013

31Jan 2013 31 Oct 2012

The liquidity reserves break down as follows: Cash and cash equivalents

42.5

31.2

Unutilized credit facilities

17.0

3.2

34.1 1.2

Total

59.5

34.4

35.3

Deposited funds for later release

35.0

35.7

68.4

Total liquidity reserve

94.5

70.1

103.7

N O T E 5 . S H A R E C A P I TA L In May 2013 the shareholders in General Meeting resolved to reduce the Company’s share capital by DKK 588.9 million from DKK 631.0 million to DKK 42.1 million by an equal writedown of all shares from DKK 15.00 to DKK 1.00, as part of a planned capital increase. The capital reduction was effected in June 2013. In September 2013 the Group implemented a rights issue in which 56,087,620 new shares of nominally DKK 1.00 were subscribed for. Accordingly, the share capital consists of 98,153,335 shares of DKK 1 each. Changes in the share capital: Number in thousands

Nominal value

Changes

End of period

Changes

End of period

31 October 2012

-

42,065.7

-

631.0

31 January 2013

-

42,065.7

-

631.0

-

42,065.7

-588.9

42.1

56,087.6

98,153.3

56.2

98.2

31 October 2013: Capital reduction on change of share denomination from nom. 15 to nom. 1 Capital increase against cash payment

The Group does not hold treasury shares.

C onsolidated financial statements | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 3 3 / 3 6


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

N OT E 6 . OT H E R R E S E RV E S

Other reserves at 1 February 2012 Special reserve transferred to distributable reserves

Special reserve

Reserve for value adjustment of available-for-sale financial assets

Reserve for value adjustment of hedging instruments

140.2

-0.1

-3.2

2.9

139.8

-140.2

0.0

0.0

0.0

-140.2 13.5

Reserve for foreign-exchange adjustments

Total

Other comprehensive income: Exchange-rate adjustment, foreign operations

0.0

0.0

0.0

13.5

Value adjustment of hedging instruments

0.0

0.0

2.1

0.0

2.1

Deferred tax on other comprehensive income

0.0

0.0

-0.4

-4.9

-5.3

Other comprehensive income, total

0.0

0.0

1.7

8.6

10.3

Other reserves at 31 October 2012

0.0

-0.1

-1.5

11.5

9.9

0.0

-0.1

-0.7

6.1

5.3

Capital decrease

Other reserves at 1 February 2013

588.9

0.0

0.0

0.0

588.9

Premium on capital increase

174.4

0.0

0.0

0.0

174.4

Costs of share issue

-11.9

0.0

0.0

0.0

-11.9

-162.5

0.0

0.0

0.0

-162.5

Special reserve transferred to distributable reserves Other comprehensive income: Exchange-rate adjustment, foreign operations

0.0

0.0

0.0

-0.5

-0.5

Value adjustment of hedging instruments

0.0

0.0

-2.1

0.0

-2.1

Deferred tax on other comprehensive income

0.0

0.0

0.4

-1.2

-0.8

Other comprehensive income, total

0.0

0.0

-1.7

-1.7

-3.4

Other reserves at 31 October 2013

588.9

-0.1

-2.4

4.4

590.8

In May 2013 the shareholders in General Meeting resolved to reduce the Company’s share capital by DKK 588.9 million from DKK 631.0 million to DKK 42.1 million by an equal writedown of all shares from DKK 15.00 to DKK 1.00, as part of the planned capital increase that was subsequently implemented in September 2013. The capital reduction was carried out in June 2013, and the amount of the reduction has been allocated to a special reserve fund that can only be used following a resolution to this effect at a General Meeting. In connection with the rights issue in September 2013, 56,087,620 new shares of nominally DKK 1.00 each were subscribed for. The new shares were subscribed for at a price of DKK 4.11 per share, which yielded net proceeds of DKK 218.6 million after the costs of the offering. The premium paid on the shares, DKK 174.4 million less the costs of the offering of DKK 11.9 million, has been transferred to distributable reserves. The reserve for value adjustment of financial assets available for sale comprises the accumulated net change in the fair value of financial assets classified as available for sale. The reserve is dissolved as the relevant financial assets are sold or expire. The reserve for value adjustment of hedging instruments comprises unrealized losses on forward-exchange transactions and interest-rate hedging transactions concluded to hedge future transactions. The reserve for foreign-exchange adjustments comprises all foreign-exchange adjustments arising on the translation of financial statements for enterprises with a functional currency other than Danish kroner; foreign-exchange adjustments relating to assets and liabilities that are part of the Group’s net investment in such enterprises; and foreign-exchange adjustments relating to any hedging transactions that hedge the Group’s net investment in such enterprises. On the sale or winding-up of subsidiaries, the accumulated foreign-exchange adjustments recognized in other comprehensive income in respect of the relevant subsidiary are transferred to the profit or loss.

3 4 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | C onsolidated financial statements


C O N S O L I D AT E D F I N A N C I A L S TAT E M E N T S

N OT E 7 . C H A N G E S I N CO N T I N G E N T AS S E TS A N D CO N T I N G E N T L I A B I L I T I E S There have been no significant changes in the Group’s contingent assets and contingent liabilities since the most recently published Annual Report. N O T E 8 . T R A N S A C T I O N S W I T H R E L AT E D PA R T I E S The Company has no related parties with a controlling interest. The Company has the following related parties: - Board of Directors and Executive Board (and their related parties) - Joint ventures and associates. 31 Oct 2013

31 Jan 013

31 Oct 2012

1,771,224

Board of Directors and Executive Board (and their related parties) 26,519,562 *)

1,940,251

Obligation towards Executive Board, employee bonds (balance)

1.5

1.5

1.5

Fees for Board of Directors

1.2

1.8

1.4

Holding of shares, in terms of number (balance)

Salaries etc., Executive Board

3.9

6.2

4.7

Interest expenses, project finance loans from Board of Directors and Executive Board

1.3

0.4

0.0 10.0

Project finance loans from Board of Directors and Executive Board (balance) Repayment, project finance loans from Board of Directors and Executive Board

0.0

21.7

-20.7

0.0

0.0

0.0

0.3

0.0

Accrued interests, project finance loans from Board of Directors and Executive Board (balance) Joint ventures Fees from joint ventures

1.3

1.5

1.3

Interest income from joint ventures

2.3

2.5

1.8

Interest expenses to joint ventures

-2.0

-1.3

-1.0

Receivables from joint ventures (balance)

80.5

46.2

70.7

107.1

88.4

90.6

Payables to joint ventures (balance)

Associates 0.3

0.4

0.3

23.8

23.6

20.8

Interest income from associates Receivables from associates (balance) *)

The increase results mainly from the change in the Board of Directors’ composition following the election of Directors at the Company’s Annual

General Meeting in May 2013.

No securities or guarantees had been furnished for balances owing to or by related parties at the reporting date. Receivables and payables are settled by payment in cash. No losses were realized on receivables from related parties. In Q1-Q3 2013/14 no impairment was made to provide for any probable losses (Q1-Q3 2012/13: DKK 0.0 million). N OT E 9 . F I N A N C I A L I N ST RU M E N TS TK Development has no significant financial instruments that are measured at fair value. During the period under review, no changes were made to the classification within the fair-value hierarchy. There have been no changes in the Group’s situation or the financial markets that materially affect the disclosures regarding financial instruments measured at fair value as appearing from the Group’s Annual Report for 2012/13.

C onsolidated financial statements | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 3 5 / 3 6


C O M P A N Y I N F O R M AT I O N

The Group’s mission

TK Development A/S

The overall mission of TK Development is to create added value by developing real property. The Group is a development and service enter-

CVR no.:

prise specialising in being the productive and creative liaison between

24256782

tenants and investors.

ISIN code: DK0010258995 (TKDV) Municipality of registered office: Aalborg, Denmark Website: www.tk-development.com e-mail: tk@tk.dk Executive Board: Frede Clausen and Robert Andersen Board of Directors: Niels Roth, Peter Thorsen, Per Søndergaard Pedersen, Arne Gerlyng-Hansen, Kim Mikkelsen and Morten Astrup.

Aalborg

Stockholm

Vestre Havnepromenade 7

Gamla Brogatan 36-38

DK-9000 Aalborg

S-101 27 Stockholm

T: (+45) 8896 1010

T: (+46) 8 751 37 30

Copenhagen

Vilnius

Islands Brygge 43

Gynėjų str. 16

DK-2300 Copenhagen S

LT-01109 Vilnius

T: (+45) 3336 0170

T: (+370) 5231 2222

Warsaw ul. Mszczonowska 2 PL-02-337 Warsaw T: (+48) 22 572 2910

Prague Karolinská 650/1 CZ-186 00 Prague 8 T: (+420) 2 8401 1010

3 6 / 3 6 | T K D E V E LO PM E N T A / S | Q 1 - Q 3 2 0 1 3 / 1 4 | C ompany information

Uk q3 announcement 2013 14  

http://tk-development.com/Files/Billeder/Issuu/Interim%20reports/2013_14/UK_Q3_Announcement_2013_14.pdf

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