Interim Report, H1 2017/18. Amerika Have, residential property Copenhagen, Denmark

Transcription

1 Interim Report, H1 2017/18 Amerika Have, residential property Copenhagen, Denmark

2 Contents 1. The Group s results in H1 2017/18 Financial highlights and key ratios Segment results Projects handed over High activity within property development NAV per share 2. Strategic focus and strategic goals 3. Markets 4. Asset management 5. Property development 6. Outlook 2

3 1. The Group s results in H1 2017/18 Strædet, Køge, Denmark 34,300 m 2 3

4 Financial highlights and key ratios (DKKm) 2013/ / / /17 H1 2016/17 H1 2017/18 Financial highlights: Net revenue Gross profit/loss Income from investments in joint ventures Operating profit/loss (EBIT) Profit/loss before tax and writedowns, etc Profit/loss before tax Profit/loss Balance sheet total 3, , , , , ,902.0 Project portfolio 2, , , , , ,168.4 Equity 1, , , , , ,304.1 Cash flows for the year Net interest bearing debt, end of period 1, , , , , ,248.7 Key ratios: Return on equity (ROE) -3.4% -2.5% -15.9% 0.6% -1.5% 1.1% Solvency ratio (based on equity) 46.4% 53.1% 45.8% 45.3% 43.5% 44.9% Price / book value (P/BV)

5 Results broken down by segment Property development Strategic focus for the Group DKKm Revenue Gross profit/loss 6.6 Income from investmentsin JV 39.6 Costs 24.0 Operating profit/loss 22.2 Income from inv. in assoc. 0.4 Financing, net 3.2 Profit/loss before tax 25.8 Total projects Balance sheet total 1,297.3 Tied-up equity Asset management The aim is to sell the assets within three to five years from December 2015 DKKm Revenue 30.4 Gross profit/loss 21.3 Income from investmentsin JV 1.3 Costs 10.0 Operating profit/loss 12.6 Income from inv. in assoc. 0.0 Financing, net Profit/loss before tax -6.0 Total projects 1,286.7 Balance sheet total 1,534.2 Tied-up equity

6 Projects handed over and other income - Property development Sale of a retail park of 3,200 m² in Oskarshamn in Sweden to a property company. Handover of the first phase of Strædet in Køge, Denmark, totalling approx. 4,400 m², to Citycon. The first phase comprises a cinema and restaurants. Handover of most of the apartments sold in Amerika Have, Copenhagen, Denmark, to the buyers. Strædet, Køge, phase 1, Denmark Opening of BROEN Shopping, Esbjerg, Denmark, on 10 April Sale of 1,700 m² youth housing units in Vanløse, Denmark, to Koncenton under a conditional sale agreement. Construction started after the balance sheet date and completion is scheduled for autumn Amerika Have, Copenhagen, Denmark 6

7 High activity within property development - selected projects in progress Strædet, Køge, Denmark mixed segments 29,900 m² Residential Park, Bielany, Warsaw, Poland, phase 3 15,650 m² Domus Vista, Frederiksberg, Denmark youth housing units 5,300 m² Østre Havn, Aalborg, Denmark rental housing 4,900 m² Østre Havn, Aalborg, Denmark owner-occupied dwellings 7,000 m² Vanløse, Denmark youth housing units 1,700 m² 7

8 NAV per share At 31 July

9 2. Strategic focus and strategic goals Arninge, Stockholm, Sweden 60,000 m 2 9

10 Strategic focus TK Development today 2020 goal Property development Activities in Denmark, Sweden and Poland. Greatest potential in Denmark and Sweden. Focus on reducing the risk exposure in Poland. A return of % p.a. on equity is expected as from 2017/18. Asset management Phasing out the activities in the Czech Republic, Germany, the Baltic States and Russia. Maturing and optimizing the operation of completed properties with a view to selling them in the period until Streamlined developer company The equity freed up from the sale of asset management activities is to be distributed to the Company s shareholders. 10

11 Follow-up on strategic goals TK Development initially expected a profit of DKK million before tax for 2017/18. A return on equity of 15-20% p.a. before tax in the property development business area as from the 2017/18 financial year Due to extraordinary events in connection with the bankruptcy of a contractor on the Strædet project in Køge, including substantial additional costs, combined with the postponed handover of another project, Management has lowered the Group s profit guidance to DKK million before tax. The profit guidance assumes a return on equity of 7-8% for the Group s development activities, against the previous forecast of about 15%. Accordingly, the strategic goal of a return on equity of 15-20% p.a. before tax from the property development business is not expected to be realised until in the financial year 2018/19. Solvency ratio of around 40% With the solvency ratio at 44.9% at 31 July 2017, this goal has been achieved. The solvency ratio is expected to exceed 40% also in the years ahead. Substantial reduction of the land portfolio Since the strategy was announced in December 2015, the land portfolio has been reduced by more than DKK 200 million and amounted to DKK 458 million at 31 July A further significant reduction of the land portfolio is being pursued. 11

12 Follow-up on strategic goals Phase-out of the Group s activities in the Czech Republic, Germany, the Baltic States and Russia Maturing and optimizing the operation of the asset management activities with a view to divestment in 2019/2020 Assets worth almost DKK 60 million have been sold since December 2015, and the phase-out continues. The carrying amount of projects totalled DKK 197 million at 31 July The Company s project in Russia was sold to a private investor after the balance sheet date. Detailed development and operating plans have been drafted for each property, and the plans are generally progressing as planned. The aim is still for the asset management activities to be sold by Overheads were down to DKK 79.7 million in 2016/17 from DKK 82.0 million in 2015/16. Gradual reduction of costs in step with strategic goal realisation Costs will be further reduced in step with the divestment of asset management activities and the phase-out of the activities in the Czech Republic, Germany, the Baltic States and Russia. 12

13 3. Markets Owner-occupied dwellings, Beddingen 7A, Aalborg, Denmark 7,000 m 2 13

14 Markets Generally, property markets are characterized by optimism. Brisk investor interest. Relatively low return requirements for primelocation property is expected to continue. Climbing e-commerce intensify competition in the retail trade sector. Retail chains are still looking to expand if the location is right. Satisfactory profit on new projects. Good project finance possibilities. Project pipeline moving ahead at a good pace due to robust tenant and investor interest. Continued low interest level and surplus of liquidity in the market increase the investment interest in real property. The residential market attractive, particularly in major towns and cities in Denmark and in Warsaw in Poland. 14

15 4. Asset management Galeria Nowy Rynek, Jelenia Góra, Poland 24,800 m 2 15

16 Asset management Total value of the portfolio (incl. projects in joint ventures) amounts to DKK 1,706 million. Carrying amount broken down by country Focus on maturing and optimizing the individual properties. The aim is to sell the assets within a three- to five-year period starting at the end of The equity freed up is to be distributed to the Company s shareholders. Denmark Germany Baltic States/Russia Poland Czech Rep. 16

17 Asset management Return on the carrying amount of 4.3%. Spread in the returns on the individual centres. Current letting situation affected by vacancies and short-term rent discount agreements with tenants. Based on full occupancy, the return on the carrying amount is expected to reach 6.2%. Operation and development plans are prepared for each property The timing of the sale of assets is assessed continuously to safeguard the best interests of the Company s shareholders. This assessment includes such elements as the risk and potential of the long-term maturing of an asset versus the time of dividend distribution, and the possibility of reducing overheads. 17

18 Asset management Galeria Tarnovia Tarnów, Poland 93 % 17,000 m², 30% ownership interest Galeria Nowy Rynek Jelenia Góra, Poland 93% 24,800 m², 30% ownership interest Footfall Footfall Revenue Revenue Affected by strong competition in the city Tenant composition has been changed Cinema opened in December 2016 Increased customer flow in the centre Increased revenue in the centre Focus on increasing the occupancy rate Efforts are made to convert short-term leases into ordinary leases with long noncancellation periods Carry on additional marketing and image building campaigns Replace weak tenants Optimise the tenant mix Launch strong marketing and image building campaigns to increase customer awareness of the centre Attract new concepts Focus on letting vacant premises Increased footfall and revenue 18

19 Asset management Galeria Sandecja Nowy Sącz, Poland 96% 17,500 m², 100% ownership interest Sillebroen Frederikssund, Denmark 91% 26,400 m², 100% ownership interest Footfall Footfall Revenue Revenue Strong competition Strong mix of tenants on the ground floor Improved mix of tenants on the first floor Revenue and footfall are increasing Interest from potential tenants Upgrade the food court Converting short-term leases into ordinary leases with long noncancellation periods ongoing Decrease in footfall and revenue, i.a. among others due to the closing of the Fona and Fakta stores Overall, the tenant mix improved in screen Nordisk Film cinema Focus on improving the occupancy rate A lease has been signed with Fitness.dk will open in October 2017 Strengthen the centre s attraction value Carry on additional marketing and image building campaigns 19

20 Asset management Ringsted Outlet Ringsted, Denmark 94% 13,200 m², 50% ownership interest Footfall Revenue The favourable trend has continued in the past year Continued growth in revenue and footfall Considerably improved occupancy rate New tenants in 2017: Lindt, Schiesser, Ecco, Betty Barclay, Kappa, Skechers, Lacoste, Moss Copenhagen and H&M (pop-up) Continued focus on improving the occupancy rate Good deal of interest from potential tenants Make preparations for contemplated expansion of the centre with a second phase 20

21 5. Property development Residential units, phase 3, Bielany, Warsaw, Poland 15,650 m² 21

22 Property development Activities in Denmark, Sweden and Poland. Property development potential in m² Property development potential of 394,000 m². Project pipeline is moving ahead at a good pace due to robust tenant and investor interest. Project pipeline underpins Management s expectation of generating a return on equity of % p.a. before tax in the property development business area as from 2018/19. Several new project possibilities within both the retail and the residential segments. Total carrying amount of the project portfolio (incl. projects in joint ventures) amounts to DKK 1,284 mio. Denmark Sweden Poland 22

23 Strædet, Køge, Denmark Comprises about 34,300 m² retail stores, public service facilities and residential premises as well as parking facilities of about 13,000 m². Sold in advance, excl. residential units The retail project of 19,000 m² has been conditionally sold to the Finnish company Citycon together with the parking facilities of 13,000 m². The bankruptcy of a contractor has let to substantial additional costs to complete the project and late delivery. The retail project will be handed over to Citycon in three phases: First phase (cinema and restaurants) was handed over in Q2 2017/18. Second phase (major part of the project) is delayed, however handover is still expected to take place in autumn Third phase is expected to be handed over in Opening of the shops is now scheduled for 28 September % of the retail project has been let. The parking facilities are fully let. The sale is expected to have a positive, if substantially reduced, impact on results for the 2017/18 financial year when the second phase of the project is handed over to Citycon. Pre-completion sale of 3,000 m² owner-occupied dwellings has started. Construction will be carried out together with the remainder of the project. 23

24 BROEN Shopping, Esbjerg, Denmark 65% partner in the development phase New shopping centre of 29,800 m². Lease agreements signed for 93% of the premises. The centre opened as scheduled on 10 April The centre is to be expanded with a cinema. Lease agreement has been concluded with Nordisk Film regarding the establishment of an eight-screen cinema in connection with the centre. The work on the local plan required for this purpose has been initiated. 24

25 Amerika Have, Copenhagen, Denmark Development in cooperation with a pension fund Development of about 12,500 m², primarily housing. The project is developed in cooperation with AP Pension and Udviklingsselskabet By & Havn I/S. A total of 121 high-quality apartments have been constructed for sale to private owners. The process of developing, constructing and selling the project has progressed satisfactorily. 119 of 121 apartments have been sold. Most of the units sold were handed over to the buyers in Q2 2017/18. 25

26 MetroBielany, residential project, phase 3, Warsaw, Poland Comprises 263 apartments and service facilities. The residential units will be sold as owner-occupied dwellings to private users. The pre-completion sale has started, and 68% of the units have been sold. Construction commenced in June 2016 and is progressing satisfactorily. Completion and handover to the buyers are scheduled for spring

27 Østre Havn, Aalborg, Denmark Area previously occupied by Aalborg Shipyard. Developed in a joint venture with Frederikshavn Maritime Erhvervspark. A number of projects are currently being planned, including 7,000 m² of youth housing units, about 12,000 m² of rental housing units, about 13,000 m² of owner-occupied units and about 13,000 m² of offices. 7,000 m² owner-occupied dwellings The sale of owner-occupied dwellings of 7,000 m² has begun and completion is expected in late The rental units will be constructed in phases. The first phase consisting of 4,900 m² has been sold to a private investor and construction began early

28 Domus Vista, youth housing units, Frederiksberg, Denmark Comprises youth housing units of about 5,300 m 2. Sold to Koncenton under a conditional sale agreeement. Sold in advance No letting risk. Construction started in October Completion and handover scheduled for early

29 Commercial district, Arninge, Stockholm, Sweden The municipal authorities have chosen TK Development as their preferred partner. Development of a new commercial district in Arninge in Stockholm. The project comprises about 60,000 m 2, primarily retail stores, with a possibility for including office premises. Good amount of interest from tenants. Good amount of interest from investors. Work on the planning proceeds together with the municipal authorities. 29

30 Sporbyen, Randers, Denmark Previously occupied by Bombardier, the train manufacturers, in Randers. Development of some 140,000 m 2 of retail shops, housing units, offices, etc. Development in a joint venture with private investors. The local development plan is expected to be finally adopted at the end of 2017, following which the joint venture is expected to take over the area. The project is attracting a good deal of interest from users and investors. Work is currently ongoing to sell the building rights for a few of the area s building plots. 30

31 6. Outlook BROEN Shopping Shopping centre Esbjerg, Denmark 29,800 m² 31

32 Outlook for 2017/18 At the end of August, Management lowered the Group s profit guidance for financial year 2017/18 from DKK million before tax to DKK million before tax. The revised profit guidance is a result of extraordinary events in connection with the bankruptcy of a contractor involved in the Strædet project, Køge, including substantial additional costs to complete the project, combined with the postponed handover of another project. The revised profit guidance assumes a return on equity of 7-8% for the Group s development activities, against the previous forecast of about 15%. The guidance reflects, among other things, that the second phase of Strædet, Køge, is expected to be handed over to the investor in autumn

33 Disclaimer The expectations mentioned in this presentation, including earnings expectations, are naturally subject to risks and uncertainties, which may result in deviations from the expected results. Expectations may be impacted by factors generally applicable to the sector as well as the factors referred to under Risk issues and note 2 to the consolidated financial statements, Accounting estimates and judgments in the Group s Annual Report 2016/17, including the valuation of the Group s project portfolio. 33