q1-2%2012_13_uk_final

TK Development – Interim report Q1-Q2 2012/13

Jelenia Góra Poland 24,000 m2

TK Development . Interim report Q1-Q2 2012/13 . 25 September 2012 2

Content 1. Q1-Q2 2012/13

• Financial highlights • Events

2. Focus on selling completed projects

3. Market conditions

4. Project portfolio • Occupancy rates • Completed projects and debt • Projects in progress and not initiated

5. Outlook


Futurum Hradec Králové, Czech Republic 28,250 m2

1. Q1-Q2 2012/13


• Profit before tax of DKK -40.0 million (DKK 8.1 million Q1-Q2 2011/12) • including value adjustment of investment properties and impairment of the project portfolio

• Profit after tax of DKK -186.6 million (DKK 16.9 million Q1-Q2 2011/12) • Equity of DKK 1,697.7 million (DKK 1,876.4 million at 31 January 2012) • Solvency ratio of 37.4 % (40.4 % at 31 January 2012) • Total balance of DKK 4,538.8 million (DKK 4,639.5 million at 31 January 2012)

Q1-Q2 2012/13 at a glance


• Conditional agreement with Heitman concerning two Polish projects

• Handing over of second phase of retail park, Kristianstad, Sweden

• Extension to Futurum Hradec Králové, Czech Republic, opened on 10 May 2012 • Fees for letting and construction management from joint venture

• Ongoing sales process - Futurum Hradec Králové

• Investment property • Value adjustment of DKK -24.3 million (DKK 16.8 million Q1-Q2 2011/12)

• Impairment of project portfolio by DKK -12.7 million (DKK 4.6 million Q1-Q2 2011/12)



• Cost-trimming • Full impact achieved on 1 August 2012 • Cost reduction in Q1-Q2 2012/13 compared to Q1-Q2 2011/12 of 18 % • The annual cost reduction target of 20 % at full impact has been met

• Impairment of deferred tax assets by DKK 150 million

• Bill enacted in June 2012 • Changed rules for tax loss carryforwards • Lengthened time horizon and increased uncertainty • Need for a total impairment of DKK 150 million



Financial highlights and key ratios (DKKm) Full year

2011/12 Q1-Q2

2011/12 Q1-Q2

2012/13

Financial highlights Net revenue 359.8 172.0 129.3 Value adjustment investment properties, net

36.7

16.8

-24.3

Gross profit/loss 195.8 85.0 49.4 Operating profit/loss (EBIT) 65.5 20.6 -3.6 Financing, etc. -83.6 -44.4 -37.5 Profit/loss before tax 14.3 8.1 -40.0 Profit/loss for the period 27.0 16.9 -186.6 Shareholders’ share of profit/loss 27.0 16.9 -186.6

Balance sheet total 4,639.5 4,521.6 4,538.8 Total project portfolio 3,498.1 3,407.2 3,615.2 Equity 1,876.4 1,881.9 1,697.7

Cash flows from operating activities -78.8 -6.6 -75.0 Net-interest bearing debt, end of period 2,244.9 2,186.3 2,327.6

Key ratios Return on equity (ROE) 1.4 % 1.8 % -20.9 % EBIT margin 18.2 % 12.0 % -2.8 % Solvency ratio (based on equity) 40.4 % 41.6 % 37.4 % Price/book value 0.3 0.5 0.4


NAV per share At 31 July 2012

0

20

40

60

80

100

120

DKK per share NAV ASSETS LIABILITIES

(107.9) (4.4) (103.5) (2.3) (5.2)

(29.3)

(8.3)

(10.1)

(48.3)

(-57.7)

(-9.8)

(40.4)

2,03

0

424

351 1,

234

219

96

4,35

4 185

4,53

9

2,42

9

412

1,69

8


• Free up cash resources • Restore the financial resources • Capital for starting up new projects

Focus on selling completed projects


Conditional agreement with Heitman regarding two Polish projects – sales value EUR 95 million • comprises Galeria Tarnovia, Tarnów and a new development project in Jelenia Góra • Heitman will take over a 70 % stake in the projects • TK Development will realize a minor profit and will free up cash resources • future profit as fee income from the jointly owned company • the Group’s share of the projects will be classified as investment properties • the agreement falls in line with the Group’s adapted business model • closing is expected in October 2012

Focus on selling projects


Galeria Tarnovia, Tarnów, Poland • shopping centre of 16,500 m2

• current occupancy rate of 96 % • satisfactory influx of customers and performing well • more than 1.7 million visitors in 2011 • footfall and revenue increased compared to Q1-Q2 2011/12 • included in the agreement with Heitman • sales price in the region of EUR 40 million

Major tenants: Simply Market, H&M, New Yorker, Reserved, Douglas, Rossman og Euro RTV AGD



Jelenia Góra, Poland



Jelenia Góra, Poland • new development project

• 24,000 m2 shopping centre • construction expected to commence in 2013 • scheduled to open in 2015 • tenants show reasonable interest in the project • included in agreement with Heitman • total project value around EUR 55 million • TK Development will receive fees for development, letting and construction management of the project




Futurum Hradec Králové, Czech Republic • owned in a joint venture with GE Capital and Heitman • extention of 9,950 m2 • construction is completed and the extension openend on 10 May 2012 • the property now comprises 28,250 m2 • current occupancy rate for the whole shopping centre is 99 % • TK Development has received fees for letting and construction management of the extension • sales process is ongoing


Fashion Arena Outlet Center, Prague, Czech Republic • 25,000 m2 outlet centre • ownership share of 75 % • first phase opened in 2007, second phase in 2010 • 7 vacant premises, 93 % let • more than 1.9 million visitors in 2011 • footfall and revenue showed an increasing trend compared to Q1-Q2 2011/12 • sales process ongoing

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



Sillebroen Frederikssund, Denmark 25,000 m2

2. Market conditions, etc.


Market conditions - GDP (% yr./yr.)

-6

-4

-2

0

2

4

6

8

2009 2010 2011 2012e 2013e

DenmarkSwedenPolandCzech. Rep.

Source: Nordea, Economic Outlook Source concerning the Czech Republic: The European Commission


Market conditions

• Land prices, rental levels, construction costs and selling prices have, following the financial crisis, stabilized at a new price level:

• New projects are expected to be sold at the profits realized before the crisis • Projects already completed are expected to be realized at a low profit

TK Development . Interim report Q1-Q2 2012/13 . 25 September 2012 19 19

FINANCING

LAND PRICES

SELLING PRICES PROJECT PROFITABILITY

Market conditions - project profitability

CONSTRUCTION PRICES

RENTAL LEVELS


Market conditions • Access to financing continues to be difficult for the developer and property

sector: • Weakened financial sector • Long decision-making processes

• Investors are showing cautious optimism and reasonable interest in prime-location projects:

• Focus on risk • Slow decision-making processes • Institutional investors need options for placing their funds • Opportunities for setting up partnerships • In line with the Group’s adapted business model

• Tenants focus on location: • Good amount of interest in prime-location projects • Long decision-making processes


BROEN, shopping centre, Esbjerg, Denmark 29,800 m2

BROENshopping.dk Facebook.com/BROENshopping.dk

3. The project portfolio


Occupancy rates

2011

2012 Q1-Q2

2012/13 Northern Europe

Sillebroen, SC, 25,000 m2, Denmark 93 % 89 % 88 % Ringsted Outlet, OC, 13,200 m2, Denmark 61 % 59 % 59 %

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

BROEN, SC, 28,000 m2, Denmark 50 % 67 % 69 %

Gävle, RP, 8,200 m2, Sweden - 94 % 94 %

Central Europe

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

Galeria Sandecja, SC, 17,300 m2, Poland 98 % 95 % 96 %

Fashion Arena Outlet Center, OC, 25,000 m2, CZ 85 % 90 % 93 %

Most, RP, 6,400 m2, CZ 84 % 84 % 84 %

Futurum Hradec Králové, SC, 9,950 m2, CZ 84 % 97 % 99 %

Frýdek Místek, SC, 14,800 m2, CZ - 57 % 66 %

*) *)

*) extension only


0

500

1000

1500

2000

2500

3000

3500

4000

4500

31.07.12

DKKm

Project portfolio and debt

1,234

Completed

Not initiated

2,030

424

Project portfolio, investment properties and net-interest bearing debt

In progress

31.07.12

2,328

cash

-flow

-gen

erat

ing

proj

ects

Investment properties

351


0

500

1000

1500

2000

2500

3000

3500

4000

4500

31.07.12

DKKm


1,234

Completed

Not initiated

2,030

424


In progress

31.07.12

2,328

cash

-flow

-gen

erat

ing

proj

ects


351


Completed = DKKm 2,030

Galeria Sandecja Nowy Sącz Poland

Fashion Arena Prague Czech Republic

Sillebroen Frederikssund Denmark

Galeria Tarnovia Tarnów Poland

Ringsted Outlet, Denmark

Most Retail Park Most, Czech Rep.

Retail park, Aabenraa, Denmark

An annual net rent of DKK 136 million is equal to a return on cost of 6.7 % on the Group’s completed

centres


0

500

1000

1500

2000

2500

3000

3500

4000

4500

31.07.12

DKKm


1,234

Completed

Not initiated

2,030

424


In progress

31.07.12

2,328

Cash

-flow

-gen

erat

ing

proj

ects


351


In progress = DKKm 351

Retail park, Gävle, phase I Gävle, Sweden

Retail park 8,200 m2

Residential Park, Bielany, phase I Warsaw, Poland

Residential units 7,850 m2

Amerika Plads Copenhagen, Denmark

Underground car park 32,000 m2

Mejlstedgade Brønderslev, Denmark

Shopping-street property 2,400 m2


0

500

1000

1500

2000

2500

3000

3500

4000

4500

31.07.12

DKKm


1,234

Completed

Not initiated

2,030

424


In progress

31.07.12

2,328

Cash

-flow

-gen

erat

ing

proj

ects


351


Esbjerg Esbjerg, Denmark

Residential Park, Bielany Warsaw, Poland

Bytom Retail Park Bytom, Poland

The Kulan commercial district Gothenburg, Sweden

Amerika Plads (lot A and C) Copenhagen, Denmark

Shopping centre 29,800 m2

Shopping centre/services 45,000 m2

Offices/residential units 24,800 m2

Residential units/services 48,350 m2

Retail park 25,800 m2

Selected Northern Europe

Selected Central Europe

Østre Teglgade Copenhagen, Denmark

Offices/residential units 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 Rep.

Outlet centre 21,500 m2

Not initiated = DKKm 1,234


4. Outlook

Galeria Tarnovia Tarnów, Poland 16.500 m2


Management considers it of great importance for the Group to sell additional, completed major 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 additional projects in the near future and to generate positive pre-tax results for the 2012/13 financial year. Thus, Management maintains its profit expectations for 2012/13.

Outlook


The expectations mentioned in this announcement, including earnings expectations, are naturally subject to risks and uncertainties, 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 Group’s 2011/12 Annual Report.

Disclaimer

q1-2%2012_13_uk_final

Documents

tax of dkk

equity of dkk

total impairment of

total balance of dkk

glance tk development

m2 tk development

outlook tk development

total project portfolio