Annual Report 2015/16. Illustration: BROEN Shopping, shopping centre Esbjerg, Denmark

Transcription

1 Annual Report 2015/16 Illustration: BROEN Shopping, shopping centre Esbjerg, Denmark

2 Contents 1. Financial highlights and key ratios 2. Strategic focus /16 at a glance Segment results Handed-over projects Projects in progress Portfolio of land 4. Market conditions 5. Project portfolio Project development Asset management 6. New sales and outlook New sales Outlook for 2016/17 2

3 Financial highlights and key ratios (DKKm) 2011/ / / / /16 Financial highlights: Net revenue Gross profit/loss Operating profit/loss (EBIT) Profit/loss before tax and writedowns, etc Profit/loss before tax Profit/loss Balance sheet total 4, , , , ,808.8 Project portfolio 2, , , , ,013.6 Equity 1, , , , ,285.7 Cash flows for the year Net interest-bearing debt, end of year 1, , , , ,099.4 Key ratios: Return on equity (ROE) 1.4 % % -3.4 % -2.5 % % Solvency ratio (based on equity) 44.9 % 39.6 % 46.4 % 53.1 % 45.8 % Price / book value (P/BV)

4 2. Strategic focus 2018 Office building, Alfa Laval Aalborg, Denmark 6,000 m² 4

5 Strategic focus Property development 2 Asset management Strategic focus for the Group. Operation of the Group s completed properties. Market focus will be narrowed down to comprise Denmark, Sweden and Poland. The potential is greatest in Denmark and Sweden. Risk exposure is largest towards Poland focus on reducing this exposure. Allocation of capacity costs to the business area as from 2016/17. Return on equity is expected to amount to % p.a. before tax as from 2017/18. Plots of land and development projects in the countries where the Group wishes to discontinue its activities in the longer term (the Czech Republic, Germany, the Baltic States and Russia). Maturing and optimizing the assets. Allocation of capacity costs to the business area as from 2016/17. The aim is to sell assets within a period of three to five years. The plan is to distribute the freed-up equity to TK Development s shareholders. Undiversified developer company that creates attractive shareholder value. 5

6 Strategic focus 2018 As part of the strategy, it was decided to launch a range of initiatives, including: To continue the strong focus on substantially reducing the portfolio of land. To continue the reduction of the Group s capacity costs in the period until To initiate a process to sell the Group s activities in the Czech Republic. To discontinue reporting separately on the activities previously called discontinuing activities. To initiate the third of four phases of the Bielany residential project in Warsaw, Poland. To include the land and development projects in the countries where the Group wishes to discontinue its activities in the longer term under asset management in the Group s future reporting. 6

7 Strategic focus 2018 Accounting effects of these initiatives with impact on results in 2015/16: Impact before tax (DKKm) Impairment of land/projects in the countries where the Group wishes to discontinue its activities in the longer term this is done to cover the special risks that Management has previously marked in relation to the discontinuing activities. Impairment of land and projects in the Czech Republic to provide for uncertainties in association with the discontinuance of the activities. Impairment of Polish plots of land, in part as a consequence of project changes in connection with the initiation of the third phase of the Bielany Residential Park with a view to reducing the portfolio of land. Impairment of goodwill as a consequence of the decision to sell the Czech activities and the low earnings expected on the Polish activities in the years ahead Total

8 /16 at a glance Strædet, Køge, Denmark 34,300 m 2 8

9 Results broken down by business segment Property Asset Results 2015/16 development management Unallocated Revenue Gross profit/loss Costs, incl. depreciation, amortization and impairment of non-current assets Operating profit/loss Income from investments in joint ventures Financing, net Profit/loss before tax Projects: Development projects Completed properties 1, , Other plots of land and projects Total projects 2, , Balance sheet total 2, , , Tied-up equity 1,

10 Handed-over projects Alfa Laval, office building, Aalborg, Denmark 6,000 m² office project in Aalborg developed for the international Alfa Laval Group. The project was sold to PensionDanmark before construction start at a total price of DKK 126 million. The completed project was handed over to the investor in June Alfa Laval, office building, Aalborg, Denmark Earnings from the sale were recognized in TK Development s results for 2015/16. BROEN Shopping, shopping centre, Esbjerg, Denmark Sale of 65 % of the project to CapMan Real Estate at the then present stage. A more detailed account is given below. The sale had no immediate impact on the Group s results. BROEN Shopping, Esbjerg, Denmark 10

11 Handed-over projects Sale of ownership share in joint venture with 1,500 m² apartments for young people at Smallegade, Frederiksberg in Copenhagen. Profit recognized in 2015/16. Sale of a purely rental residential project of 2,500 m² in Aarhus to a private investor. Profit recognized in 2015/16. Apartments for young people, Smallegade, Frederiksberg, Denmark Sale of lot A at Amerika Plads, Copenhagen, to A.P. Møller - Mærsk A/S. Profit recognized in 2015/16. Sale of superstores in Randers to private investors. Profit recognized in 2015/16. Sale of building rights to Køge Municipality to be used for public functions, including a town hall and rehabilitation centre. The public functions will form part of the project, Strædet. Profit recognized in 2015/16. 2,500 m 2 residential units, Aarhus, Denmark 11

12 Major development projects in progress BROEN Shopping, Esbjerg, Denmark shopping centre 29,800 m² Strædet, Køge, Denmark mixed segments 34,300 m² Amerika Have, Copenhagen, Denmark residential units 12,500 m² Bielany Residential Park, Warsaw, Poland, phase 3 15,650 m² Substantial reduction in the Group s portfolio of land. 12

13 Portfolio of land Ongoing construction projects covering more than 85,000 m². The carrying amount of the portfolio of land has been halved in the past 3 years and currently amounts to DKK 561 million. The portfolio of land remains significant, especially in Poland The third phase of the Bielany Residential Park will, therefore, be initiated. Reduction of DKK 182 million, once phases 3 and 4 of the Bielany Residential Park have been started up. Focus on substantially reducing the portfolio of land Portfolio of land Plots of land under asset management Plots of land under property development Portfolio of land broken down by country Denmark Poland Czech Republic Baltic States Development costs Other 13

14 Completed Investment prop. In progress Plots of land Investments in joint v. Receivables Other assets Total assets Tax assets/goodwill Balance sheet total Credit institutions Other liabilities NAV 1, , , ,809 1,393 NAV per share at 31 January 2016 DKK per share ASSETS LIABILITIES NAV (2.7) (2.8) (1.2) (27.8) (0.8) (28.6) (-14.2) 20 (5.6) (11.7) (0.6) (3.2) (-1.3) (13.1)

15 Financial issues Refinancing of Sillebroen, Frederikssund, Denmark Agreement with PKA on a refinancing over a five-year term was concluded in November The loan amounts to DKK 500 million. Credit facilities with main banker Renegotiated once a year. Extended until 30 September Project credit facilities Total project credit facilities of DKK 1.4 billion. Of which DKK 336 million were due to expire prior to the end of January Prolongation of a significant portion was granted after the reporting date. The remainder is expected to be prolonged before maturity. 15

16 4. Market conditions Amerika Have, Copenhagen, Denmark 12,500 m 2 16

17 Market conditions Generally, property markets are characterized by optimism. Several new project opportunities in the retail and residential segments. Good amount of interest from investors. Satisfactory profit on new projects. Project finance options are available again. The Group s markets are characterized by expectations for moderate to respectable economic growth and a moderate rise in private consumption, varying in strength from country to country. Strong project pipeline with projects moving ahead at a good pace due to robust tenant and investor interest. Climbing Internet sales intensify competition in the retail trade sector. The historically low interest level contributes to increasing interest in real property as an asset class. 17

18 3. Project portfolio Residential units, phase 3 Bielany, Warsaw, Poland 15,650 m² 18

19 1 Property development Comprises the following markets: Denmark, Sweden and Poland. Development potential in m² Development potential of 329,000 m². Strong project pipeline with projects moving ahead at a good pace due to robust tenant and investor interest. Total carrying amount of the project portfolio (including projects in joint ventures) amounts to DKK 911 million. Carrying amount of projects not initiated has declined by DKK 252 million since 31 January Denmark Sweden Poland 19

20 1 Property development In progress (DKK 437 million incl. joint ventures) Strædet Køge, Denmark BROEN Shopping Esbjerg, Denmark Harald Nyborg Rødekro, Denmark Amerika Have Copenhagen, Denmark Residential Park, Bielany Warsaw, Poland Retail/residential 34,300 m 2 Shopping centre 29,800 m 2 Retail 2,150 m 2 Residential units 12,500 m 2 Residential/services 14,850 m 2 Retail project conditionally sold to Citycon Building rights for public functions sold to Køge Municipality 72 % let 73 % let 65 % sold to CapMan Real Estate Extension comprising a cinema is currently being investigated Included in JV as investment property under construction Conditionally sold Fully let Handed over to investor after the reporting date Residential project in cooperation with By & Havn and AP Pension Pre-completion sale was started after the reporting date and is proceeding satisfactorily 85 % sold in advance Construction is scheduled for completion in spring

21 1 Property development Not initiated (selected) (DKK 443 million* ) ) Østre Havn Aalborg, Denmark Østre Havn Aalborg, Denmark Østre Havn Aalborg, Denmark Østre Havn Aalborg, Denmark The Kulan Commercial District Gothenburg, Sweden Residential Park, Bielany Warsaw, Poland Apartments for young people 7,000 m 2 Rental residential units 5,450 m 2 Residential units for private owners 11,700 m 2 Other projects 41,850 m 2 Shopping centre/services 55,000 m 2 Residential/services 29,300 m 2 Local plan is expected to be finally adopted in spring 2016 Local plan Focus on letting Construction of phase 3 will be initiated in spring 2016 The advance sale started in the beginning of 2016 *) excl. plots of land in the Czech Republic, Germany and the Baltic States 21

22 2 Asset management Comprises the Group s completed projects, as well as plots of land and development projects in the countries where the Group wishes to discontinue its activities in the longer term. Carrying amount broken down by country Total value of the portfolio (incl. projects in joint ventures) amounts to DKK 1,716 million. Focus on maturing and optimizing the individual properties. Aim to sell the assets within a three- to fiveyear period. Plan to distribute the equity thus freed up to TK Development s shareholders. Denmark Poland Germany Czech Rep. Baltic States/Russia 22

23 2 Asset management Return on the carrying amount of 4.4 % Large spread in the return 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 % 23

24 2 Asset management Galeria Tarnovia Tarnów, Poland 86 % 16,700 m², 30 % ownership share Galeria Nowy Rynek Jelenia Góra, Poland 95 % 24,800 m², 30 % ownership share Strong competition Declining revenue and footfall - however stabilized in 2016 Tenant composition is being changed, including establishment of a cinema Occupancy rate increased to 86 % (incl. cinema) Carrefour: New supermarket operator since autumn 2014 Proactively optimize the tenant mix after opening of the cinema Opened in October % let Centre operations have met expectations Focus in 2016: Replace weak tenants Optimize tenant mix Launch a marketing campaign and strengthen the centre profile, capitalizing on the novelty value 24

25 2 Asset management Galeria Sandecja Nowy Sącz, Poland 96 % 17,300 m², 100 % ownership share Underground car park, Amerika Plads Copenhagen, Denmark 32,000 m², 50 % ownership share Strong competition Rental level under pressure Declining revenue and footfall - however stabilized in 2016 Ground-floor premises almost fully let Optimize tenant mix Relaunch the first floor Not being utilized to capacity at present Expectations for higher occupancy and operation once the development of the remaining area is completed Lease agreement for 102 parking spaces concluded with A.P. Møller - Mærsk A/S. Expected to take effect from autumn

26 2 Asset management Sillebroen Frederikssund, Denmark 96 % 26,400 m², 100 % ownership share Ringsted Outlet Ringsted, Denmark 84 % 13,200 m², 50 % ownership share Increased footfall Increased revenue Higher occupancy rate New tenants such as Imerco, Normal and Søstrene Grene 4-screen cinema for Nordisk Film - will open in autumn 2016 Upgrade parking facilities Proactively optimize tenant mix after opening of the cinema Increased footfall Increasing revenue Opening of new and larger BOSS outlet Expand the premises let to Calvin Klein New tenants: Golfino, Villeroy & Boch, Gant Continued focus on increasing the occupancy rate Good amount of interest from potential tenants Work on the prospect of expanding the centre with a second phase 26

27 Other asset management activities - carrying amount of DKK million at 31 January 2016 Comprise plots of land and development projects in the Czech Republic, Germany, the Baltic States and Russia. At 31 January 2016 the projects comprise the following: Czech Republic: 1 development project and 2 plots of land Germany: 2 plots of land Baltic States: 1 project in progress and 2 plots of land Russia: 1 rental project Management has decided to initiate a process to sell the Group s Czech activities, either by selling all activities combined or by selling individual assets. An agreement has been made with a real estate agent, who will be in charge of the sales process. In the Baltic States a small staff of employees has been retained in order to develop and execute the individual projects with due consideration paid to retaining the maximum possible value of the projects. 27

28 4. New sales and outlook BROEN Shopping, shopping centre Esbjerg, Denmark 29,800 m² 28

29 New sales and outlook Ongoing construction projects covering more than 85,000 m². The project pipeline is looking strong, and the projects are moving ahead at a good pace due to robust tenant and investor interest. The majority of the projects are scheduled for completion in 2017/18 or later. Several new project opportunities within the retail segment as well as the residential segment. Underpins the Group s future earnings. 29

30 Construction of residential units in Poland Residential Park, Bielany, Warsaw, Poland - phase 2 Comprises 297 apartments and service areas. 85 % of the apartments have been sold in advance. Construction is scheduled for completion in spring Are being sold as owner-occupied apartments to private users. Residential Park, Bielany phase 2 Residential Park, Bielany, Warsaw, Poland - phase 3 Comprises 263 apartments and service areas. Pre-construction sale initiated at the beginning of Construction is expected to start in spring Completion and start of handover to the buyers is expected to take place in spring Are being sold as owner-occupied apartments to private users. Residential Park, Bielany phase 3 30

31 Amerika Have, Copenhagen, Denmark In 2014/15 an agreement was concluded with AP Pension on the development of a project of about m², mainly residential units. Development in cooperation with pension fund AP Pension holds a 50 % ownership share of a newly established company. The remaining 50 % share is owned 50/50 by Udviklingsselskabet By & Havn I/S and TK Development. The residential premises will consist of 121 highquality apartments for sale to private owners. Construction started in September The pre-completion sale started in March 2016 and is proceeding satisfactorily. The profits anticipated on the sale will be recognized upon handover of apartments to the respective buyers, expected to take place from spring

32 Sale of Strædet, Køge, Denmark Comprises about 34,300 m² retail stores, public functions and residential units as well as about 13,000 m² parking facilities. Sold in advance, excl. residential units Construction of the first phase began in March 2015, and the next phases have been initiated on an ongoing basis. The construction project has been delayed by six months and opening has been postponed till autumn The construction is now making good progress. The retail project comprises 19,000 m² and together with the parking facilities of about m², it has been sold conditionally to the Finnish company Citycon. 72 % of the retail stores have been let. The parking facilities are fully let. The selling price amounts to about DKK 560 million, based on a return of 6.25 %. The sale is expected to have a significant positive impact on results in 2017/18 when the completed project is handed over to Citycon. The building rights for public functions have been sold to Køge Municipality. 32

33 Sale of a share of BROEN Shopping, Esbjerg, Denmark 65 % partner in development phase Development of a new shopping centre of about 29,800 m² in Esbjerg. Lease agreements concluded for 73 % of the premises. First turf was cut at the end of May Construction is proceeding satisfactorily. 65 % of the project has been sold to CapMan Real Estate, which has joined the project as partner in the development phase. TK Development will receive fees from the jointly owned company for project development, letting and construction management. Opening is scheduled for spring

34 Østre Havn, Aalborg, Denmark Area previously occupied by Aalborg Shipyard. Development in joint venture with Frederikshavn Maritime Erhvervspark. Total project area of more than 65,000 m². New local plan comprising m², mainly residential units and office premises, is expected to be finally adopted in spring TK Development is currently working on developing both the residential and the office projects in the area. Rental residential units Owneroccupied residential units Apartments for young people 34

35 Outlook for 2016/17 Management still expects consolidated results before tax for 2016/17 to total DKK million. This profit estimate is based on the expectation that a number of ongoing small and medium-sized projects will be executed before the end of the current financial year. TK Development is recording good progress on the individual projects. The majority of the projects are expected to be completed, handed over to the investor and thus recognized in income in Q4 2016/17. The Group s most significant development projects are not expected to contribute to consolidated results until subsequent financial years. 35

36 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, including the valuation of the Group s project portfolio. 36