Meddelelse_11_12%20UK%20final

TK Development – preliminary announcement of financial statements 2011/12

Fashion Arena Prague, Czech Rep. 25,000 m2

1. The financial year 2011/12 • Results • Events in 2011/12

2. Business model adapted • The background to the adaptation • The model reduces the buyer’s risk • Reduction of cost level

3. The project portfolio • Occupancy rates • Completed projects and debt • In progress and not initiated

4. Outlook

2

Content

TK Development – preliminary announcement of financial statements 2011/12 . 26 April 2012

Tivoli Warsaw, Poland

5,600 m2

1. The financial year 2011/12

• Profit of DKK 27.0 million after tax (DKK 73.6 million the year before) • Equity totalled DKK 1,876.4 million (DKK 1,866.0 million at 31 January 2011) • Solvency ratio of 40.4 % (40.4 % at 31 January 2011) • Balance sheet total of DKK 4,639.5 million (DKK 4,622.0 million at 31 January 2011)

4

2011/12 at a glance


5

Financial highlights and key ratios (DKKm) 2007/08 2008/09 2009/10 2010/11 2011/12

Financial highlights:

Net revenue 2,598.9 1,073.2 1,384.9 602,4 359.8

Gross profit/loss 553.8 375.0 200.5 256.0 195.8

Profit/loss from ordinary activities before financing 386.8 201.7 57.5 127.2 65.5

Financing, etc. -41.7 -33.4 -17.9 -53.2 -83.6

Profit/loss before tax 345.4 168.0 39.4 74.2 14.3

Consolidated profit/loss 271.9 155.2 25.4 73.6 27.0

Shareholders’ share of profit/loss for the year 249.5 155.2 25.4 73.6 27.0

Balance sheet total 4,070.9 3,816.1 4,377.3 4,622.0 4,639.5

Total project portfolio 1,998.3 2,541.3 3,253.5 3,424.7 3,498.1

Equity excl. minority interests 1,439.9 1,506.0 1,593.4 1,866.0 1,876.4

Equity 1,533.8 1,506.0 1,593.4 1,866.0 1,876.4

Cash flows from operating activities 142.6 -331.7 -582.8 -182.7 -78.8

Net interest-bearing debt, end of year 1,094.9 1,509.5 2,178.9 2,170.2 2,244.9

Key ratios:

Return on equity (ROE) 19.2 % 10.5 % 1.6 % 4.3 % 1.4 %

Earnings before interest and tax (EBIT margin) 14.9 % 18.8 % 4.2 % 21.1 % 18.2 %

Solvency ratio (based on equity) 37.7 % 39.5 % 36.4 % 40.4 % 40.4 %

Price / book value 1.2 0.4 0.5 0.5 0.3


6

0

20

40

60

80

100

120

DKK per share NAV ASSETS LIABILITIES

(110.3) (7.7)

(102.6) (2.6) (6.3)

(27.8)

(7.2)

(10.5)

(48.2)

(-56.1)

(-1.1) (-8.5)

(44.6)

2,0

27

44

1 3

03

1,1

68

26

5 1

11

4,3

15

32

5

4,6

40

2,3

61

47

35

6

1,8

76

NAV per share


Sale of stake in Euro Mall Centre Management

• Originally a necessary service offered to investors on the East and Central European markets. • Several service operators are being established, and EMCM is no longer vital to the development activities of TK Development. • EMCM was sold to the US Group CB Richard Ellis. • The sale was recognized in Q2 2011/12.

April April June July August September February December January

2011/12

Events

7

2011/12

Events

Construction of first phase in Bielany, Poland, started

• Building permit for the Group’s project in Bielany, Poland, has been obtained. • The total project comprises about 56,200 m2, primarily housing (in total 900-1,000 units). • Construction of the first phase of 7,850 m2 (136 units) was started in mid- 2011. Construction is progressing as planned and the opening is scheduled for the end of 2012. • The residential units are expected to be sold as owner-occupied apartments to private users. About 30 % of the 136 units have been sold.


8

Construction of office space in the Tivoli Residential Park completed

• Construction of 5,600 m2 office space was completed in August. • A total of 5,450 m2 has been sold and was handed over to the buyers in the course of Q3 – the number one buyer is the medical company Swissmed. • The Group has previously constructed, sold and handed over a total of 280 residential units in the Tivoli Residential Park. • In total, the Group has built more than 24,000 m2 in connection with the Tivoli project.

2011/12

Events


9

Construction of retail park in Gävle, Sweden, started

• Construction of the first phase (8,200 m²) of retail park in Gävle has started. • Occupancy rate is 94 % and lease agreement have been concluded with Jysk, Stadium, Ö&B and Rusta – only one small unit is still vacant. • The retail park is scheduled to open in October 2012. • The Group has an option to buy a plot of land for developing additional premises of about 15,800 m2.

2011/12

Events


10

Option on 36,000 m2 of Køge Kyst

• On 29 February 2012, the Group signed an option to buy land for developing a total of 36,000 m² premises immediately next to Køge Station. • The project comprises 15,000 m2 retail, 9,000 m2 office space and 12,000 m2 residential premises. • The Group has started the pre-construction letting of premises, and various retail chains have indicated keen interest in renting premises in Køge. • Køge Kyst is a partnership between Køge Municipality and Realdania By. In total, the Køge Kyst development project comprises 240,000 m2.

2011/12

Events


11

Sillebroen Frederikssund, Denmark

25,000 m2

2. Business model adapted

13

Market conditions have undergone great changes since the onset of the financial crisis. However, tenants continue to show reasonable interest in new prime-location projects, and, while focusing on low project risk, investors are taking a greater interest in viable projects.

• Land prices, rental levels, construction costs and selling prices have stabilized

at a new price level after the financial crisis: • New projects can be realized at the profit level realized before the crisis. • A low profit is expected to be realized on projects already completed.

• Access to financing for developer and property businesses is expected to remain challenging: • One reason being that the banks need to strengthen their financial position and

reduce their balance sheet.

• Investors will continue to focus on low project risk: • In addition to a sluggish decision-making process, this means that more investors will

delay investing until projects have been started up or matured. • This results in a lower project turnover.

The background to the adaption


Buyer’s risk

Sale

s p

rice

Low High

High

Low

14

The model reduces the buyer’s risk


Startup and maturing

Development

15

Startup risks are eliminated from the project. and higher selling prices compensate for the weaker project flow. Revenue during this phase: • Profits on sale • Rental income • Value adjustment

Public authority approvals, letting, and construction management reduces project risks. Revenue during this phase: • Profits on sale • Fees (from cooperations)

Buyer’s risk Low High

Sale

s p

rice

High

Low

The model reduces the buyer’s risk


Startup and maturing

Development

16

1. The Group’s primary focus will continue to be real property development: • The Group can develop projects for its own account or by using forward funding • The Group can develop projects together with business partners during the

construction phase.

2. The Group can choose to initiate projects with a view to construction and subsequent startup and maturing over a short span of years, such projects typically being classified as investment properties:

• This added element to the business model is a natural consequence of the changed risk picture, including in particular the change in investor behaviour, which means that the development process for some projects is not optimally finalized until they have been matured and run in

• Investment properties can be developed either for the Group’s own account or in project development joint ventures with co-investors

• A classification of a project as investment property means that the value of the properties will reflect a market value calculated by using a market-based return requirement in a discounted cashflow model.

Business model


17

Management’s aim with the implemented changes is to transform the Group’s operations and balance sheet:

• For new development projects where long-term investors are expected to focus on startup and maturing before investing, the Group will accord priority to executing the development and maturing phases in collaboration with a partner

• Partnerships will enable the Group to utilize its know-how and resources more efficiently

• The partial ownership of certain projects through partnerships will improve risk diversification and equity allocation

• To a large extent, the Group will attempt to secure new projects on an option basis • The Group expects to continuously reduce the carrying amount of building sites in

step with project completion • The Group will aim for its operating result before tax to break even before selling

major projects.

Transformation of operations and balance sheet


18

0

50

100

150

200

12/13e 08/09 09/10 10/11 11/12

Staff costs

Emloyees, average

(166)

(146) (132) (135)

(112)

The Group’s cash capacity costs DKKm

( )

Other external expenses

Reduction of cost level


+ Rental income + Fees + Profits on minor development projects Gross profit/loss ÷ Costs ÷ Interest Profit/loss before tax (to break even as a minimum)

+ Profits on major development projects + Upside on collaboration projects

Fees from third-party owned or partly owned projects: • Development fee • Letting fee • Construction fee • Asset management fee.

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TK Development – årsregnskabsmeddelelse 2011/12 . 26. april 2012

Creating profit

3. The project portfolio

BROEN shopping centre, Esbjerg, Denmark 29,800 m2

Occupancy rates

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2011 2012

Northern Europe

Sillebroen, SC, 25,000 m2, Denmark 93 % 89 %

Premier Outlets Center, OC, 13,200 m2, Denmark 61 % 59 %

Aabenraa, RP, 4,200 m2, Denmark 82 % 100%

BROEN, SC, 29,800 m2, Denmark 50 % 67 %

Gävle, RP, 8,200 m2, Sweden - 94 %

Central Europe

Galeria Tarnovia, SC, 16,500 m2, Poland 98 % 96 %

Galeria Sandecja, SC, 17,300 m2, Poland 98 % 95 %

Fashion Arena Outlet Center, OC, 25,000 m2, Czech Rep. 85 % 90 %

Most, RP, 6,400 m2, Czech Republic 84 % 84 %

Futurum Hradec Králové, SC, 9,950 m2, Czech Republic 84 % 97 %

Frýdek Místek, SC, 14,800 m2, Czech Republic - 57 %


0

500

1000

1500

2000

2500

3000

3500

4000

4500

31.01.12

22

1.168

2.027

367

74

31.01.12

2.245

Inv. properties under construction Inv. properties

303

Portfolio and investment properties plus net interest bearing debt DKKm

Completed

Not initiated

In progress

Pro

ject

s ge

ne

rati

ng

cash

flo

w


Book value and debt

0

500

1000

1500

2000

2500

3000

3500

4000

31.01.12 31.01.09 31.01.11 31.01.10

DKKm

2,541

3,250

1,159

23

565

1,168

817

Completed

In progress

Not initiated

Book value

2,027

303

3,425 3,498

1,157

2,107

161

1,176

1,352

722

Book value, project portfolio


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Galeria Sandecja Nowy Sącz Poland

Fashion Arena Prague Czech Republic

Sillebroen Frederikssund Denmark

Galeria Tarnovia Tarnów Poland

Premier Outlets Center Ringsted, Denmark

Most Retail Park Most, Czech Rep.

Aabenraa Aabenraa, Denmark

Completed = DKKm 2,027

0255075

100125150

0

25

50

75

100

125

0

25

50

75

100

125

Cu

sto

mer

s

Turn

ove

r 0

25

50

75

100

125

Index 2011/2010

Index 2011/2010

Index 2011/2010

Index 2011/2010

103 103 127 109

102 99 98 101

An annual net rent of DKKm 140 equals a

return on cost of about 7 %

Cu

sto

mer

s

Turn

ove

r

Cu

sto

mer

s

Turn

ove

r

Cu

sto

mer

s

Turn

ove

r


0

500

1000

1500

2000

2500

3000

3500

4000

31.01.12 31.01.09 31.01.11 31.01.10

DKKm

25

1,168

2,027

303

2,541

3,250

3,425 3,498

Completed

In progress

Not initiated

Book value



26

In progress = DKKm 303

Shopping centre 9,950 m2

(Investment property)

Retail park, Gävle, phase I

Gävle, Sweden

Retail park 8,400 m2

Residential Park, Bielany, phase I

Warsaw, Poland

Residential units 7,850 m2

Extension, Futurum Hradec Králové

Hradec Králové, Czech Rep.

Amerika Plads

Copenhagen, Denmark

Underground car park 32,000 m2

Shopping street property, Mejlstedgade

Brønderslev, Denmark

Shopping street property 2,400 m2

Mixed 5,400 m2

Trøjborgvej

Aarhus, Denmark


0

500

1000

1500

2000

2500

3000

3500

4000

31.01.12 31.01.09 31.01.11 31.01.10

DKKm

2,541

3,250

27

1,168

2,027

303

3,425 3,498

Completed

In progress

Not initiated

Book value



Esbjerg

Esbjerg, Denmark

Residential Park, Bielany

Warsaw, Poland Bytom Retail Park

Bytom, Poland

The Kulan commercial district

Gothenburg, Sweden Amerika Plads (A and C)

Copenhagen, Denmark


Shopping centre/services 45,000 m2

Office/residential 24,800 m2

Residential/services 48,350 m2

Retail park 25,800 m2

Selected projects in Northern Europe

Selected projects in Central Europe

Østre Teglgade

Copenhagen, Denmark

Office/residential 32,700 m2

Stuhrs Brygge

Aalborg, Denmark

Mixed 72,000 m2

Jelenia Góra

Jelenia Góra, Poland


Frýdek Místek

Frýdek Místek, Czech Rep.


Designer Outlet Village Moravia

Moravia, Czech Republic

Outlet centre 21,500 m2

28

Not initiated = DKKm 1,168


Galeria Tarnovia Tarnów, Poland 16,500 m2

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4. Outlook

Management considers it of great importance for the Group to sell a number of major completed projects in the 2012/13 financial year. The sale of major completed projects will generate the cash resources required to underpin future operations and project flow, and thus long-term earnings. In light of the volatility of financial markets, the volume, timing and proceeds of major project sales are subject to uncertainty. Despite this uncertainty, Management expects to sell a number of projects in the near future and to generate positive pre-tax results for the 2012/13 financial year.

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Outlook


The expectations mentioned in this announcement, including earnings expectations, are naturally subject to risks and ucertainties, which may result in deviations from the expected results. Expectations may be affected by various factors, as mentioned in the section ”Risk issues” (in the Preliminary announcement of financial statements 2011/12), which applies in particular to the valuation of the Group’s deferred tax asset.

Disclaimer

Meddelelse_11_12%20UK%20final

Documents

financial year

financial highlights

tax dkk

equity totalled dkk

profit of dkk

balance sheet total

total project portfolio

end of year