Uk q3 announcement 2013 14

I N T E R I M R E P O R T Q 1 - Q 32013/14

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

ILLUSTRATION:

FRÝDEK MÍSTEK, SHOPPING CENTRE

CZECH REPUBLIC

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

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

Page

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S U M M A R Y

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

2 0 1 3 / 1 4

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

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 %.

Cash flows for the period amounted to DKK 11.3 million

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

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

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

ary 2013.

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

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

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

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

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

project was exercised immediately before construction star-

tup in August 2013. Construction is progressing as planned.

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

nancial year.

In the municipality of Danderyd near Stockholm, TK Develop-

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

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

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

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

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

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

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

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 %).

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

of a planned shopping centre project of 14,800 m2 in the

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

ing the sale, TK Development currently holds an ownership

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

fee income for letting and managing the construction of the

project and related services. The current occupancy rate is

82 %. Construction started in autumn 2013, and the ope-

ning is scheduled for the end of 2014.

In Esbjerg, TK Development owns a plot earmarked for the

construction of a new shopping centre, BROEN, of about

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

opment is in dialogue with a potential investor about the

sale of a project share. Preparatory construction works have

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

tion and approval process to ensure safe railway operations,

etc., which will postpone the startup of construction.

In addition, agreements regarding the letting and sale of

several minor retail projects have been concluded. The ear-

nings from these sales are expected to be recognized in the

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

investors.

The Group’s project portfolio in the property development

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

2013: 451,000 m²).

A S S E T M A N A G E M E N T The total portfolio of own properties under asset manage-

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

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

2013, of which investment properties accounted for DKK

314.7 million. The annual net rent from the current leases

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

Based on full occupancy, the return on the carrying amount

is expected to reach 7.9 %.

The operation of these properties is generally proceeding

satisfactorily. Overall the revenue in the centres is devel-

oping positively, but the footfall is showing signs of decline

at a few centres.

D I S C O N T I N U I N G A C T I V I T I E S For the first nine months of 2013/14, results before tax of

the discontinuing activities amounted to DKK -13.5 million

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

At 31 October 2013 the balance sheet total for the disconti-

nuing activities amounted to DKK 374.7 million against DKK

425.4 million at 31 January 2013, a decline of 11.9 %. Do-

musPro Retail Park in Vilnius, Lithuania, accounted for DKK

ILLUSTRATION:

BARKARBY GATE, RETAIL PARK

STOCKHOLM, SWEDEN

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S U M M A R Y

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

The results before tax of the discontinuing activities, DKK

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

folio of DKK 3.4 million.

In June 2013 a minor investment property in Germany was

sold and handed over to the buyer.

In September 2013 TK Development entered into an agree-

ment regarding the sale of an additional German investment

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

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

als the carrying amount.

In August 2013 TK Development announced that the Group’s

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

conditionally sold to BPT Baltic Opportunity Fund, which is

managed by BPT Asset Management. The project will be

handed over to the buyer once the usual commercial condi-

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

struction and letting. The selling price is based on a return

requirement of 8.5 %. The project is to be built in phases,

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

ted in August 2013, with the opening scheduled for spring

2014.

M A R K E T C O N D I T I O N S In Management’s opinion the Group’s markets are showing

signs of recovery. Consumer confidence is rising generally,

and expectations for financial growth in the Group’s markets

are mounting, although varying from country to country.

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

usual during this economic growth phase of the business

cycle, rendering the property markets somewhat precarious

and leading to consistently long decision-making processes

among investors, tenants and financing sources in the indi-

vidual countries.

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 finan-

cing 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.

F I N A N C I A L I S S U E S At the Company’s Annual General Meeting on 22 May 2013,

the Board of Directors was authorized to carry out a capital

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

The capital increase was implemented in September 2013.

A substantial portion of the proceeds from the capital in-

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

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

granted by a number of the Company’s major shareholders

and members of Management.

TK Development has a general agreement with the Group’s

main banker about operating and project credits. The agre-

ement 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 in-

crease. This reduction took place in September 2013.

Since 31 January 2013 TK Development has entered into ag-

reements 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 implemen-

tation 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 in 2013/14. 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.

With the implementation of the capital increase, the Group

has fulfilled its strategic goal of achieving a solvency ratio

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

margin reductions on several major credits.

O U T LO O K FO R 2 0 1 3 / 1 4Management 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 los-

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

before tax of the discontinuing activities have not been inclu-

ded in the outlook for 2013/14.

The expectations mentioned in this Interim Report, including

earnings expectations, are naturally subject to risks and un-

certainties, which may result in deviations from the expected

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

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

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

portfolio.

CO N S O L I DAT E D F I N A N C I A L H I G H L I G H TS A N D K E Y R AT I OS | Q 1 - Q 3 2 0 1 3 / 1 4 | T K D E V E LO PM E N T A / S | 5 / 3 6

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

2013/14

Q1-Q3

2012/13

Full year

2012/13

F I N A N C I A L H I G H L I G H T S :

Net revenue 285.5 204.0 632.3

Value adjustment, investment properties, net -0.3 -32.5 -37.8

Gross profit/loss 111.9 -191.7 -139.5

Operating profit/loss (EBIT) 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

Balance sheet total 3,936.2 4,338.1 4,009.3

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 -22.2 -116.5 45.6

Net interest-bearing debt, end of period 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 %

Equity value in DKK per share 16.0 28.9 28.4

Price/book value (P/BV) 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

Earnings per share (EPS) in DKK -0.7 -9.7 -10.1

Dividend in DKK per share 0 0 0

Listed price in DKK per share 7 12 11

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

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

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.

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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 A N AG E M E N T COM M E N TA RY

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

Development recorded results of DKK -21.6 million before tax

for the continuing activities against DKK -292.7 million in the

same period the year before.

The results before tax, including discontinuing activities,

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

the first nine months of 2012/13.

The results after tax amounted to DKK -39.2 million against

DKK -473.4 million in 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 sol-

vency ratio stood at 39.8 %.

The results for the first nine months of 2013/14 and the bal-

ance sheet at 31 October 2013, broken down by business seg-

ment, appear from the tables below.

The activities within each individual business segment are de-

scribed in more detail on pages 13-24.

The property development segment is described on pages

13-17. The description includes information about the

development potential of TK Development’s project portfolio,

including an outline of the individual development projects.

The asset management segment is described on pages

18-22. The description contains information about TK

Development’s own properties under asset management, in-

cluding an outline of the operation and customer influx for the

individual projects.

The discontinuing activities are described on page 23-24,

which provides more details about TK Development’s proper-

ties and projects in the countries where Management has de-

cided to phase out activities.

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

R E S U LT S Q 1 - Q 3 2 0 1 3 / 1 4 ( D K K M )

Profit/loss

Q1-Q3

2013/14

Property

development

Asset

management Discontinuing Unallocated

Revenue 285.5 174.2 102.2 9.1 0.0

Gross margin 111.9 24.7 89.0 -1.8 0.0

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

Tax on the profit/loss for the period 4.1 - - - 4.1

Profit/loss for the period -39.2 -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

31 Oct

2013

Property

development

Asset

management Discontinuing Unallocated

Assets

Investment properties 426.4 - 314.7 111.7 -

Investment properties under construction 22.1 22.1 - - -

Other non-current assets 163.2 3.8 3.3 - 156.1

Projects in progress or completed 3,019.2 1,149.9 1,628.9 240.4 -

Receivables 223.8 58.7 139.9 22.2 3.0

Cash, cash equivalents, escrow accounts, etc. 81.5 22.8 15.7 0.4 42.6

Assets 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

Other liabilities 338.4 106.4 158.2 32.3 41.5

Equity and liabilities 3,936.2 1,257.3 2,102.5 374.7 201.7

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.

M A N AG E M E N T COM M E N TA RY | 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

AC C O U N T I N G P O L I C I E SThe Interim Report is presented in accordance with IAS 34, In-

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

closure requirements for listed companies.

The Interim Report has been presented in accordance with

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

tations applicable for financial years beginning at 1 February

2013.

The implementation of new and amended financial reporting

standards and interpretations that have entered into force as

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

measurement in the consolidated financial statements and

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

earnings per share.

In March 2013 the Board of Directors decided to change the

internal reporting procedure. In this connection, the segment

definition has been revised, and segments are now divided into

property development, asset management and discontinuing

activities. The comparative figures have been restated accord-

ingly.

The accounting policies have been applied consistently with

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

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

Group’s accounting policies.

No interim financial statements have been prepared for the

Parent Company. The Interim Report is presented in DKK, which

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

functional currency of the Parent Company. The Interim Report

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

AC 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 SThe most significant accounting estimates and judgments

made by Management in applying the Group’s accounting pol-

icies, and the associated, estimated material uncertainty, are

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

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

therefore made to the Annual Report.

I N C O M E S TAT E M E N TRevenue

The revenue for the period under review totalled DKK 285.5

million against DKK 204.0 million in the first nine months of

2012/13.

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

come, etc.

Handed-over projects

Retail park, Enebyängen, Danderyd, Sweden

In the municipality of Danderyd near Stockholm, TK Develop-

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

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

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

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

The total project has been sold to the German investment fund

Commerz Real.

Residential park, Bielany, Warsaw, Poland

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

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

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

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

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

pied apartments to private users.

Shopping centre, Frýdek Místek, Czech Republic

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

a planned shopping centre project of 14,800 m2 in the Czech

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

TK Development currently holds an ownership share in the proj-

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

and managing the construction of the project and related ser-

vices.

Gross margin

The gross margin amounted to DKK 111.9 million against DKK

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

margin derives from the operation of the Group’s completed

projects, the operation and value adjustment of the Group’s in-

vestment properties and profits on handed-over projects.

The value adjustment of the Group’s investment properties

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

ing to the German investment properties and DKK 0.7 million

relating to remaining investment properties. The value adjust-

ment amounted to DKK -32.5 million for the first nine months

of 2012/13.

Staff costs and other external expenses

Staff costs and other external expenses amounted to DKK

69.5 million against DKK 75.6 million for the first nine months

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

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

lion in the same period the year before, a decline of about 7

%. The number of employees totalled 92 at 31 October 2013


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

shopping centres.

Other external expenses amounted to DKK 20.4 million, a re-

duction of about 11 % compared to the first nine months of

2012/13.

Overheads are to be reduced by around 20 % relative to

2012/13, with half of the reduction deriving from the discon-

tinuation of activities in Germany, Finland and the Baltic States.

Cost-reducing measures have been implemented and are ex-

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

Development in costs:

Costs, DKKm Costs, trend

0

30

60

90

120

150

180

2014/15E

2013/14B

2012/13

2011/12

2010/11

2009/10

2008/09

Financing

TK Development realized net financing expenses of DKK 77.4

million against DKK 58.7 million in the first nine months of

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

costs on individual project credits and partly to the declining

volume of projects on which interest is capitalized following the

decision to sell some of the Group’s plots of land.

In connection with the capital increase implemented in Sep-

tember 2013, TK Development has obtained interest margin

reductions on several major credits.

Corporate income tax

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

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

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

adoption of new legislation to gradually reduce the corporate

tax rate, which has lengthened the time horizon for utilizing the

Group’s Danish tax asset.

B A L A N C E S H E E TThe Group’s balance sheet total amounted to DKK 3,936.2 mil-

lion, which is a decline of DKK 73.1 million compared to 31 Jan-

uary 2013.

Goodwill

Goodwill is unchanged compared to 31 January 2013, amount-

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

to the Group’s property development and asset management

activities in Poland and the Czech Republic. There are no indica-

tions of any need to impair the value of goodwill.

Investment properties and investment properties under con-

struction

TK Development’s investment properties consist of:

Futurum Hradec Králové, shopping centre, the Czech Repub-lic (a 20 % interest)

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

German investment properties.

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

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

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

Group’s German investment properties.

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

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

described in more detail in the section “Discontinuing activities”

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.

The valuation of the Czech investment property, the Futurum

Hradec Králové shopping centre, made at 31 January 2013 was

based on the ongoing sales process. This valuation was upheld

at 31 October 2013.

TK Development’s 30 % ownership interest in Galeria Tarnovia

has been valued at fair value based on the agreement made

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

Heitman.

TK Development’s investment properties under construction

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

development project in Poland. No value adjustment of this

project was made at 31 October 2013, pending fulfilment of

the conditions in the agreement with the investor, and thus

startup of the project.

Deferred tax assets

Deferred tax assets were recorded at DKK 120.5 million in the

balance sheet against DKK 127.0 million at 31 January 2013.

The valuation of the tax assets is based on existing budgets

and profit forecasts for a five-year period. For the first three

years, budgets are based on an evaluation of specific projects

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

years is based on specific projects in the project portfolio with

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

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opportunities.

Due to the substantial uncertainties attached to these valu-

ations, provisions have been made for the risk that projects

are postponed or not implemented and the risk that project

profits fall below expectations. A change in the conditions and

assumptions for budgets and profit forecasts, including time

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

er than that computed at 31 October 2013, which could have

an adverse effect on the Group’s results of operations and fi-

nancial position.

Project portfolio

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

DKK 3,030.9 million at 31 January 2013. The decline is a com-

bined result of an increase in the Group’s portfolio of ongoing

projects and a decrease due to the sale of projects.

Total prepayments based on forward-funding agreements

amounted to DKK 0.3 million against DKK 369.6 million at 31

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

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

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

ment properties amounted to DKK 2,086 million at 31 October

2013 (31 July 2013: DKK 2,126 million), and the Group’s net

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

2013: DKK 2,183 million).

Total portfolio and interest-bearing debt:

Net interest-bearing debt, DKKm

0

625

1250

1875

2500

31 Oct 1331 Jan 1331 Jan 1231 Jan 1131 Jan 1031 Jan 09

Investment properties and completed projects, DKKm

Receivables

Total receivables amounted to DKK 223.8 million, a decline of

DKK 17.2 million from 31 January 2013 that relates mainly to

other receivables.

Cash and cash equivalents

Cash and cash equivalents amounted to DKK 42.5 million

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

cash resources, see note 4, came to DKK 94.5 million against

DKK 70.1 million at 31 January 2013.

Equity

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

DKK 1,389.7 million at 31 January 2013.

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

lion of the capital increase implemented in September 2013.

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

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

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

iaries and hedging instruments.

The solvency ratio amounts to 39.8 %.

With the implementation of the capital increase, the Group has

thus fulfilled its strategic goal of achieving a solvency ratio of

about 40 %.

Equity and solvency:

Equity, DKKm Solvency ratio

0

500

1,000

1,500

2,000

31 Oct 1331 Jan 1331 Jan 1231 Jan 1131 Jan 1031 Jan 09

59 %

39.5

%

36.4

% 40.4

%

40.4

%

34.7

% 39,8

%

Non-current liabilities

The Group’s non-current liabilities represented DKK 139.8 mil-

lion against DKK 141.0 million at 31 January 2013. The differ-

ence is primarily attributable to debt owing to credit institu-

tions.

Current liabilities

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

against DKK 2,478.6 million at 31 January 2013.

CA S H F LO 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

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

result of the reduction in funds tied up in projects following

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

as well as other operating items.

The Group’s cash flows from investing activities were positive

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

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

two of the Group’s German investment properties.

The cash flows from financing activities were negative in

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

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

combined result of the proceeds generated by the capital in-


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 A N AG E M E N T COM M E N TA RY

crease implemented in September 2013, the reduction in pay-

ables to credit institutions and the financing raised for project

investments.

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

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

the year before.

E X E C U T I O N O F A N N O U N C E D S T R AT EGYAs described in company announcement no. 6/2013 and the

Annual Report for 2012/13, in March 2013 Management re-

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

to adjust its market focus.

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

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

the strategy execution is progressing satisfactorily and as

planned.

The initiatives adopted and the current status of their execu-

tion are outlined below:

The remaining activities will be limited to Denmark, Sweden,

Poland and the Czech Republic.

• TK Development’s activities in Germany, Finland and

the Baltic States are being discontinued, and the

phase-out is progressing satisfactorily. The German

activities have been downscaled through the sale of

investment properties. In the Baltic States, a conditio-

nal agreement has been concluded regarding the sale

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

which will be handed over to the buyer upon comple-

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

many, and Helsinki, Finland, have been closed down,

and the employees have been dismissed.

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

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

• This process is progressing satisfactorily and accor-

ding to plan.

The balance sheet is to be adjusted, with a solvency ratio of

about 40 %.

• After implementing the capital increase in September

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

vency ratio amounted to 39.8 % at 31 October 2013.

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 Bal-

tic States.

• Cost-reducing measures have been implemented and

are expected to achieve full impact in the course of

2014/15.

Financing costs are to be normalized as a result of the initia-

tives implemented.

• In connection with the implementation of the capi-

tal increase, the Group has reached agreements for

a reduction of the interest payable on several major

credits, and is currently negotiating interest rate re-

ductions for other credits.

Management believes that a platform for normalized earnings

will have been established once the above-mentioned adapta-

tions have been implemented.

F I N A N C I A L I S S U E SCapital increase

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

the Board of Directors was authorized to carry out a capital in-

crease with gross proceeds of about DKK 210-231 million. The

capital increase was implemented in September 2013.

For technical reasons, a capital reduction was implemented

before the capital increase, whereby the denomination of all

shares was written down from DKK 15 to DKK 1. The capital

reduction amounted to DKK 588.9 million, which was allocated

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

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

eral Meeting.

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

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

yielding gross proceeds of DKK 230.5 million. The net proceeds

after costs totalled DKK 218.6 million.

A substantial portion of the proceeds from the capital increase

has been used to reduce the debt to credit institutions, as well

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

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

agement.

Other financial issues

The fact that a number of completed projects have not been

sold means a substantial portion of the Group’s financial re-

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

ects will free up the cash resources essential for strengthening

the Group’s financial platform. Moreover, financial resources

will be secured to regenerate momentum and thus to realize

the development potential inherent in several of the Group’s

projects.

Planned projects are initiated once the commercial conditions

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

nancing of the project has been procured, either from credit


M A N AG E M E N T COM M E N TA RY | 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

institutions or from investors in the form of forward funding.

Project startup is also contingent on the provision of any equity

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

es, with due consideration for the liquidity covenants adopted

by Management.

TK Development has a general agreement with the Group’s

main banker about operating and project credits. The agree-

ment 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 agree-

ments 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 LO O K FO R 2 0 1 3 / 1 4Management 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 dis-

continuing 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 un-

certainties, which may result in deviations from the expected

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

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

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

portfolio.

S U B S EQ U E N T E V E N T S No major events affecting the Company other than those men-

tioned in the Management Commentary have occurred after

the reporting date.



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

signs of recovery. Consumer confidence is rising generally, and

expectations for financial growth in the Group’s markets are

mounting, although varying from country to country.

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

usual during this economic growth phase of the business cy-

cle, rendering the property markets somewhat precarious and

leading to consistently long decision-making processes among

investors, tenants and financing sources in the individual coun-

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 fi-

nance 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 invest-

ing in selected segments of retail projects, with location and re-

turns 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 process-

es continue to be lengthy, in part because of the investors’ re-

quirement for lower project risk.

Institutional investors, including pension funds, need options

for placing their funds and are taking a greater interest in prop-

erty 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 proj-

ects. 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 de-

velopment 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 fo-

cus on location. The rental level for prime-location projects is

expected to remain fairly stable in the period ahead. TK Devel-

opment is experiencing a good amount of interest in prime-lo-

cation projects, and several strong national and international

retail chains are expanding again. The interest shown by ten-

ants in secondary locations is relatively slack, and the rental

level for such locations is expected to remain under pressure.

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

periencing rising demand for housing and regularly concludes

agreements for the sale of apartments in its completed res-

idential project in Bielany. The volume of projects initiated

dropped for a period, which has stabilized the supply of housing

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

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

prices for attractive housing. In the opinion of Management,

housing development in Poland has become attractive again,

particularly in the Warsaw area.

M A R K E T C O N D I T I O N S


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

Strategy for business area – Property development

Developing projects from the conceptual phase through to project

completion, based on one of several models:

• Sold projects (forward funding/forward purchase)

• Projects with partners

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

letting and sales potential

• Services for third parties.

Property development

Countries: Denmark, Sweden, Poland

and the Czech Republic

Revenue: Q1-Q3 2013/14: DKK 174.2 million

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

Gross profit/loss: Q1-Q3 2013/14: DKK 24.7 million

(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 se-

curing robust pre-construction letting or sales. In addition, the

Group continuously works on new project opportunities.

Planned projects are initiated once the commercial conditions

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

nancing of the project has been procured, either from credit

institutions or from investors in the form of forward funding.

Project startup is also contingent on the provision of any equity

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

es, with due consideration for the liquidity covenants adopted

by Management.

The gross margin for development activities amounted to DKK

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

-115.2 million in the same period of 2012/13.

The Group’s retail projects on which construction is already on-

going or about to start are still attracting a good amount of in-

terest from tenants. During the period under review, the Group

also concluded lease agreements for several of these projects.

Moreover, agreements regarding the letting and sale of several

minor retail projects have been concluded. The earnings from

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

nancial year upon handover of the projects to the investors.

The development potential of the project portfolio represent-

ed 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.

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

low:

DKKm

31 Jan

2012

31 Jan

2013

31 Oct

2013

Sold

Completed 0 15 3

In progress 17 17 26

Not initiated 10 6 0

Total 27 38 29

Remaining

Completed 0 38 8



Total 1,224 1,137 1,121

Net project portfolio 1,251 1,175 1,150

Forward funding 293 370 0

Gross project portfolio 1,544 1,545 1,150

Forward funding in

% of gross carrying

amount of sold

projects 91.6 % 91.1 % 0.0 %

Table 1

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

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

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

vestors.

The development potential of the Group’s project portfolio is

shown below (in square metres):

m² (’000)

31 Jan

2012

31 Jan

2013

31 Oct

2013

Sold

Completed 0 4 0

In progress 7 3 21


Total 36 7 21

Remaining

Completed 0 3 1



Total 599 445 413

Total project portfolio 635 452 434

Number of projects 50 37 36

Table 2

P R O P E R T Y D E V E L O P M E N T



Geographical segmentation of the development potential in square metres:

Sweden

Denmark

Czech Republic

Poland

Project outline

The outline below lists the key projects in the portfolio in the property development segment.

Project City/town Country Segment

TKD’s

share of

area (m2)

TKD’s

ownership

interest

Construction

start/

expected con-

struction start

Opening/

expected opening

Completed

Residential park, Bielany, phase I Warsaw PL Residential/services 1,150 100 % Mid-2011 January 2013

In progress

Amerika Plads,

underground car park Copenhagen DK Underground car park 16,000 50 % 2004 Continuously

Vasevej Birkerød DK Mixed 3,400 100 % - -

Ahlgade Holbæk DK Mixed 1,550 50 % October 2013 Autumn 2014

Barkarby Gate, retail park Stockholm SE Retail 20,000 100 % August 2013 Autumn 2014

Shopping centre, Frýdek Místek Frýdek Místek CZ Retail 1,480 10 % Autumn 2013 End-2014

Not initiated

BROEN, shopping centre Esbjerg DK Retail 29,800 100 % - -

Østre Teglgade Copenhagen DK Office/residential 32,700 1) 100 % Continuously Continuously

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 1) 50 % Continuously Continuously

Retail park, Marsvej Randers DK Retail 4,700 100 % Mid-2014 2015

Development of town centre Køge DK Mixed 26,500 100 % 2014 Continuously

The Kulan commercial district Gothenburg SE Mixed 45,000 100 % 2014 2016

Retail park, Söderhamn Söderhamn SE Retail 10,000 100 % 2014 2015

Retail park, Gävle, phase II Gävle SE Retail 15,800 100 % Continuously Continuously

Shopping centre, Jelenia Góra Jelenia Góra PL Retail 7,320 30 % Early 2014 End-2015

Residential park, Bielany,

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 2,000 100 % - -

Property development, total floor space approx. 356,000 1) Share of profit on development amounts to 70 %.


C O M P L E T E D P R OJ EC T S Residential park, Bielany, Warsaw, Poland

TK Development owns a tract of land in Warsaw allowing for

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

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

Construction of the first phase of 7,850 m², consisting of 136

units, was completed in January 2013. 93 % of the first-phase

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

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

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

over to the buyers at 31 October 2013. Management expects

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

or four months.

P R O J E C T S I N P R O G R E S SAmerika Plads, underground car park, Copenhagen, Denmark

Kommanditaktieselskabet Danlink Udvikling (DLU), which is

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

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

and an underground car park. Part of the underground car park

in the Amerika Plads area has been built. The Group expects to

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

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

“Projects not initiated” below.

Vasevej, Birkerød, Denmark

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

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

a refurbishment of the existing property and a minor extension

comprising a few stores and dwellings.

Ahlgade, Holbæk, Denmark

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

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

in Holbæk. The residential section has a floor space of about

1,900 m² and was conditionally sold to a housing association in

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

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

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

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

the commercial section. Construction started in October 2013,

and the opening is scheduled for autumn 2014.

Barkarby Gate, retail park, Stockholm, Sweden

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

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

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

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

agreements have been concluded with various major tenants,

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

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

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

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

ing. Construction started in August 2013 and is progressing as

planned. The opening has been scheduled for autumn 2014.

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

dover of the project to the investor.

Shopping centre, Frýdek Místek, Czech Republic

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

a planned shopping centre project in the Czech town of Frýdek

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

ment currently holds an ownership share in the project of 10

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

TK Development will receive fee income for letting and man-

aging the construction of the project and related services. The

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

agreements have been concluded with such tenants as Billa,

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

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

2014.

P R OJ EC T S N OT I N I T I AT E DBROEN, shopping centre, Esbjerg, Denmark

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

ping centre project, BROEN, of about 29,800 m², to be built

at Esbjerg Station. The shopping centre is expected to com-

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

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

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

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

alogue with a potential investor about the sale of a project

share. Preparatory construction works have been initiated, but

the project must undergo a special validation and approval pro-

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

pone the startup of construction.

Østre Teglgade, Copenhagen, Denmark

TK Development owns an attractively located project area at

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

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

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

ested party regarding the construction of residential property

in the area.

Amerika Plads, lots A and C, Copenhagen, Denmark

Kommanditaktieselskabet Danlink Udvikling (DLU), which is

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

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

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

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

complex with about 13,000 m² of commercial and residential

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



Østre Havn/Stuhrs Brygge, Aalborg, Denmark

In the area previously occupied by Aalborg Shipyard at Stuhrs

Brygge, TK Development is developing a business and residen-

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

with Frederikshavn Maritime Erhvervspark on a 50/50 basis.

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

ment being effected for the development rights acquired in

step with the development and execution of specific projects.

TK Development has entered into a conditional lease agree-

ment with Alfa Laval regarding the construction of office prem-

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

executed within the framework of the existing local plan, and

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

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

offices and parking facilities has been launched.

Retail park, Marsvej, Randers, Denmark

In October 2010 the Group took over a plot of land on Marsvej

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

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

of interest among potential tenants.

Development of town centre, Køge, Denmark

TK Development is working on a potential project in Køge. In

February 2012 Køge Kyst and TK Development entered into a

conditional agreement under which TK Development is to buy

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

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

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

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

and rehabilitation centre, residential premises of about 3,300

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

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

plan was adopted in June 2013. TK Development expects to

enter into an agreement with Køge Municipality regarding the

municipality’s takeover of both town hall and rehabilitation

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

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

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

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

2,000 m² has been let to supermarket operators, an approx.

5,400 m² rehabilitation centre to the municipality and about

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

park to EuroPark. Construction is expected to start in 2014

once the construction contract with a contractor is in place.

The Kulan commercial district, shopping centre and service/

commercial space, Gothenburg, Sweden

TK Development and the Swedish housing developer JM AB

have entered into a cooperation agreement with SKF Sverige AB

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

burg. The contemplated project comprises a total floor space

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

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

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

a shopping centre, services and commercial facilities, while JM

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

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

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

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

aged. The project is being discussed with potential tenants,

and a number of lease agreements have been concluded.

Retail park, phase II, Gävle, Sweden

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

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

property company Nordika Fastigheter AB. Moreover, TK Devel-

opment has an option to buy a plot of land for developing addi-

tional retail park premises of about 15,800 m².

Shopping centre, Jelenia Góra, Poland

TK Development has bought a plot of land in Jelenia Góra

and has an option on additional land for the development of

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

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

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

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

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

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

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

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

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

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

interest was classified under “Investment properties under con-

struction”. TK Development will receive fee income from the

jointly owned company established for developing, letting and

managing the construction of the project.

Residential park, Bielany, Warsaw, Poland

TK Development owns a tract of land in Warsaw allowing for

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

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 suc-

cessive phases in continuation of the completion of the first

phase and once pre-construction sales have reached a sat-

isfactory level. A building permit for the second phase of the

project, consisting of about 300 residential units and service




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 leas-

able space of about 25,800 m² on its site at the Plejada shop-

ping 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.


The Group’s secondary business area is asset management,

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

optimizing completed projects for a medium-long operating pe-

riod whose length matches the potential for adding value.

Strategy for business area – Asset management

Owning, operating, maturing and optimizing completed projects for

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

ing value.

Asset management

Countries: Denmark, Sweden, Poland

and the Czech Republic


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

Gross profit/loss: Q1-Q3 2013/14: DKK 89.0 million

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

Balance sheet total: 31 October 2013: DKK 2,102.5 million

(31 January 2013: DKK 2,100.7 million)

Number of employees at centres:

31 October 2013: 13

(31 January 2013: 12)

Breakdown of own properties under asset management by

country (carrying amount):

Czech Republic

Denmark

Poland

A S S E T M A N A G E M E N T

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

Project Country Type

TKD’s ownership

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

Other completed projects

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 % 2,400

Total 138,250

The gross margin for asset management activities amount-

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

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

Although these properties have been classified under asset

management, TK Development will focus on selling them in

whole or in part, as their sale will substantially strengthen

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

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

short period of time.

The total portfolio of properties under asset management

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

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

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

314.4 million). The operation of these properties, which

largely consist of shopping centres, is generally proceeding

satisfactorily. The annual net rent from the current leases

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

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

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

7.9 %).

Overall the individual centres recorded favourable develop-

ment in 2012, with the positive trend in revenue continuing

in 2013, but the footfall is showing signs of decline at a few

centres.

The development of the individual centres appears from

pages 20-22.


Generally, TK Development’s properties have a satisfactory let-

ting status, and the current occupancy rates are:

Brønderslev, shopping-street property

Aabenraa, retail park

Most Retail Park

Ringsted Outlet

Galeria Sandecja, Nowy Sącz

Fashion Arena Outlet Center, Prague

Sillebroen, Frederikssund

Galeria Tarnovia, Tarnów

Futurum Hradec Králové 100 %

94 %

91 %

96 %

96 %

61 %

91 %

71 %

93 %



Opening November 2000/May 2012

Leasable area 28,250 m²

Occupancy rate 100 % (Q2 2013/14: 100 %)

Footfall 2012 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 conti-nues to have a satisfactory occupancy rate, operating profit and cust-omer influx. Both the revenue and the footfall for the shopping centre have shown an increasing trend in 2013 relative to 2012.

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

Opening November 2009Leasable area 16,500 m², including a supermarket

of about 2,000 m²

Occupancy rate 94 % (Q2 2013/14: 94 %)


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 ai-med at bolstering occupancy and customer influx, among other things.

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

F U T U R U M H R A D E C K R Á L O V É , C Z E C H R E P U B L I C

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 March 2010

Leasable area 25,000 m², including about 5,000 m² of supermarket units

Occupancy rate 91 % (Q2 2013/14: 92 %)


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 po-sition the centre on the market. TK Development’s focus is on strengt-hening the occupancy and revenue levels for the centre.

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

S I L L E B R O E N , S H O P P I N G C E N T R E , F R E D E R I K S S U N D , D E N M A R K



Opening November 2007/October 2010


Occupancy rate 96 % (Q2 2013/14: 96 %)


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.

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

Opening October 2009

Leasable area 17,300 m², including a hypermarket of about 5,000 m²

Occupancy rate 96 % (Q2 2013/14: 97 %)


The operation of Galeria Sandecja is still proceeding satisfactorily. Du-ring 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.

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

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

G A L E R I A S A N D E C J A , S H O P P I N G C E N T R E , N O W Y S Ą C Z , P O L A N D

Opening March 2008


Occupancy rate 61 % (Q2 2013/14: 62 %)


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 Ring-sted Outlet recorded the highest number of visitors and the highest re-venue 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 Su-perdry, 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.

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

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



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 va-cant rental unit should be let before the project can be sold.

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.

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

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

TK Development has developed retail stores of about 2,400 m2 in the for-mer 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 %).

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



As described previously, Management has chosen a market

focus that targets the countries expected to contribute with

long-term, profitable operations in future. This means that the

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

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

closures and employee dismissals, will be carried out as soon

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

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

as much of the value of the existing portfolio as possible. The

Company’s branch offices in Berlin, Germany, and Helsinki, Fin-

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

ployees in these countries have been dismissed.

Discontinuing activities

Countries: Germany, Finland, Lithuania,

Latvia and Russia


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

Gross profit/loss: Q1-Q3 2013/14: DKK -1.8 million

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

Balance sheet total: 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)

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

discontinuing activities amounted to DKK -13.5 million against

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

adjustments of the German investment properties amounted

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

DKK -8.2 million in the same period the year before. At 31 Oc-

tober 2013 the balance sheet total for the discontinuing activ-

ities amounted to DKK 374.7 million against DKK 425.4 million

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

in Vilnius accounted for DKK 78.9 million of the balance sheet

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

tinuing activities, DKK -13.5 million, included impairment losses

on the project portfolio of DKK 3.4 million.

G E R M A N Y In September 2013 TK Development entered into an agree-

ment regarding the sale of yet a German investment property,

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

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

amount.

Following the sale of a residential rental property in June 2013

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

now has two investment properties left in Germany. These

properties consist of a combined commercial and residential

rental property in Lüdenscheid in western Germany and one

residential rental property on the outskirts of Berlin. Manage-

ment considers it essential to continue downscaling the Ger-

man activities.

The value of these properties totalled DKK 111.7 million at 31

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

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

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

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

ten.

In addition to these investment properties, the Group owns a

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

The employees left their positions at the end of September

2013, and the branch office has closed down.

F I N L A N DThe Group’s activities in Finland are fairly limited and, apart from

a few project opportunities, comprise the projects listed below.

Project City/town Segment

Floor space

(m²)

Pirkkala Retail Park, phase II Tammerfors Retail 5,400

Kaarina Retail Park Turku Retail 6,600

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

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

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

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

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

31 October 2013.

B A LT I C S TAT E SThe Group’s Baltic activities comprise the following projects:

Project City/town Segment

Floor space

(m²)

DomusPro Retail Park Vilnius (LT) Retail 11,100

Milgravja Street Riga (LV) Residential 10,400

Ulmana Retail Park Riga (LV) Retail 12,500

DomusPro Retail Park, Vilnius, Lithuania

TK Development owns a plot of land in Vilnius reserved for

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

tionally sold to BPT Baltic Opportunity Fund, which is managed

by BPT Asset Management. The project will be handed over

to the buyer once the usual commercial conditions have been

met, including those relating to project construction and let-

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

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

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

progressing as planned. The opening is scheduled for spring

2014. TK Development is engaged in constructive dialogue with

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

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

D I S C O N T I N U I N G A C T I V I T I E S


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.

R U S S I AThe Group owns a minor project in Moscow, consisting of Scan-

dinavian-style dwellings that are used for rental, mainly to in-

ternational company employees stationed in Moscow. Efforts

will be made to sell this project.

D I S C O N T I N U I N G A C T I V I T I E S


O T H E R M AT T E R S

T R A N S AC T I O N S W I T H R E L AT E D PA RT I E SDuring 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 Manage-

ment. In September 2013 TK Development repaid these project

finance loans out of the proceeds from the capital increase im-

plemented. Apart from this, no significant or unusual transac-

tions 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 STo provide for sufficient future financial resources, liquidity tar-

gets have been formulated for the whole Group. Moreover, Man-

agement 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 DJ U S T M E N T O F WA R R A N T SAs a consequence of the capital reduction and capital increase

implemented in 2013, the Board of Directors resolved, in ac-

cordance 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 sub-

scription price for exercising the warrants. The adjustment was

made to ensure that the value of the warrants for the employ-

ees will be maintained after implementation of the above-men-

tioned 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.

OT H E R M AT T E R SFor 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

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 | STAT E M E N T BY T H E B OA R D O F D I R ECTO RS A N D E X EC U T I V E B OA R D

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

Aalborg, 18 December 2013

E X EC U T I V E B O A R D

B O A R D O F D I R EC TO R S

Frede Clausen

President and CEO

Robert Andersen

Executive Vice President

Peter Thorsen

Deputy Chairman

Per Søndergaard Pedersen Arne Gerlyng-Hansen

Niels Roth

Chairman

Kim Mikkelsen Morten Astrup

The Board of Directors and Executive Board have today consid-

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

for the period from 1 February to 31 October 2013.

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

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

34, Interim Financial Reporting, as adopted by the EU, and Dan-

ish 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.

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

presentation of the development in the Group’s activities and

financial affairs, the results for the period and the Group’s over-

all financial position, as well as a true and fair description of

the most significant risks and elements of uncertainty faced

by the Group.

CO N S O L I DAT E D F I N A N C I A L STAT E M E N TS | 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

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

DKKm NoteQ1-Q3

2013/14Q1-Q3

2012/13Q3

2013/14Q3

2012/13Full year

2012/13

Net revenue 285.5 204.0 66.7 74.7 632.3

External direct project costs 2 -173.3 -363.2 -31.2 -307.6 -734.0

Value adjustment of investment properties, net -0.3 -32.5 -0.3 -8.2 -37.8

Gross profit/loss 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

Depreciation and impairment of non-current assets 1.2 1.7 0.3 0.5 2.2

Operating profit/loss 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

Tax on profit/loss for the period 4.1 147.0 -1.7 0.4 167.3

Profit/loss for the period -39.2 -473.4 -9.1 -286.8 -493.3

E A R N I N G S P E R S H A R E I N D K K

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

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 -39.2 -473.4 -9.1 -286.8 -493.3

Items that may be re-classified to profit/loss:

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

Tax on value adjustment of hedging instruments 0.4 -0.4 0.1 -0.2 -0.6

Other comprehensive income for the period -3.4 10.3 0.8 3.0 5.7

Comprehensive income for the period -42.6 -463.1 -8.3 -283.8 -487.6

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

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 | CO N S O L I DAT E D F I N A N C I A L STAT E M E N TS


B A L A N C E S H E E T

DKKm Note 31 Oct 2013 31 Jan 2013 31 Oct 2012

ASSETS

Non-current assets

Goodwill 33.3 33.3 33.3

Intangible assets 33.3 33.3 33.3

Investment properties 426.4 479.4 417.2

Investment properties under construction 22.1 16.9 0.0

Other fixtures and fittings, tools and equipment 1.5 2.5 3.0

Property, plant and equipment 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

Current assets

Projects in progress or completed 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

Corporate income tax receivable 3.0 4.0 5.6

Other receivables 105.5 122.4 115.7

Prepayments 18.7 22.4 21.8

Total receivables 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



B A L A N C E S H E E T

DKKm Note 31 Oct 2013 31 Jan 2013 31 Oct 2012

EQUITY AND LIABILITIES

Equity

Share capital 5 98.2 631.0 631.0

Other reserves 6 590.8 5.3 9.9

Retained earnings 877.2 753.4 773.2

Total equity 1,566.2 1,389.7 1,414.1

Liabilities

Credit institutions 108.3 102.2 45.1

Provisions 0.4 2.3 4.0

Deferred tax liabilities 29.6 35.0 38.9

Other debt 1.5 1.5 3.8

Total non-current liabilities 139.8 141.0 91.8

Credit institutions 1,923.3 2,189.1 2,426.9

Trade payables 98.6 106.3 208.5

Corporate income tax 8.1 5.0 7.8

Provisions 9.2 13.1 6.6

Other debt 177.7 150.2 167.8

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



S TAT E M E N T O F C H A N G E S I N EQ U I T Y

DKKm Share

capitalOther

reservesRetained earnings

Total equity

Equity at 1 February 2012 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 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

Capital decrease -588.9 588.9 0.0 0.0

Capital increase 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

Equity at 31 October 2013 98.2 590.8 877.2 1,566.2



CA S H F LO W S TAT E M E N T

DKKm

Q1-Q3

2013/14

Q1-Q3

2012/13

Full year

2012/13

Operating profit/loss 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

Provisions -5.6 -4.4 0.4

Foreign-exchange adjustment -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

Changes in deposits on blocked and escrow accounts 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

Interest paid, etc. -95.7 -104.7 -142.9

Interest received, etc. 4.7 3.6 4.3

Corporate income tax paid -0.2 -23.5 -22.1

Cash flows from operating activities -22.2 -116.5 45.6

Investments in equipment, fixtures and fittings -0.2 -0.3 -0.2

Sale of equipment, fixtures and fittings 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

Sale of securities and investments 0.4 0.5 0.9

Cash flows from investing activities 47.6 -7.7 6.4

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

Reduction of project financing/repayments, credit institutions -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

Foreign-exchange adjustment of cash and cash equivalents 0.0 1.4 0.3

Cash and cash equivalents, end of period 42.5 34.1 31.2

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


N OT 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.

DKKmDevelopment

Asset management

Discontinuingactivities Unallocated Total

31 Oct 2013

Net revenue, external customers 174.2 102.2 9.1 0.0 285.5

Profit/loss before tax 10.6 41.4 -13.5 -73.6 -35.1

Segment assets 1,257.3 2,102.5 374.7 201.7 3,936.2

Segment liabilities 596.1 1,344.2 147.1 282.6 2,370.0

DKKmDevelopment

Asset management

Discontinuingactivities Unallocated Total

31 Oct 2012

Net revenue, external customers 78.3 114.8 10.9 0.0 204.0

Profit/loss before tax -109.1 -103.5 -33.7 -80.1 -326.4

Segment assets 1,364.6 2,289.8 454.3 229.4 4,338.1

Segment liabilities 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 EC T P R OJ EC T C O S T S

Q1-Q3 2013/14

Q1-Q3 2012/13

Full year2012/13

Project costs 167.0 71.0 446.1

Impairment losses on projects in progress or completed projects 6.3 292.2 303.5

Reversal of impairment losses on projects in progress or completed projects 0.0 0.0 -15.6

External direct project costs, total 173.3 363.2 734.0

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 OT E 3 . S H A R E - B A S E D PAYM 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:Number of warrants 31 Oct 2013 31 Jan 2013 31 Oct 2012

Outstanding warrants, beginning of year 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

Expired during the period -446,315 -761,497 -761,497

Outstanding warrants, end of period 615,461 930,315 946,315

Number of warrants exercisable at the reporting date 0 446,315 446,315

Share-based payment recognized in the profit or loss (DKK million) 0.5 0.9 0.8

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 34.1

Unutilized credit facilities 17.0 3.2 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 OT E 5 . S H A R E CA 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 increa-

se. 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

31 October 2013:

Capital reduction on change of share denomination from nom. 15 to nom. 1 - 42,065.7 -588.9 42.1

Capital increase against cash payment 56,087.6 98,153.3 56.2 98.2

The Group does not hold treasury shares.


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

Special reserve

Reserve for value adjust-

ment of avail-able-for-sale

financial assets

Reserve for val-ue adjustment

of hedging instruments

Reserve for foreign-exchange

adjustments Total

Other reserves at 1 February 2012 140.2 -0.1 -3.2 2.9 139.8

Special reserve transferred to distributable reserves -140.2 0.0 0.0 0.0 -140.2

Other comprehensive income:

Exchange-rate adjustment, foreign operations 0.0 0.0 0.0 13.5 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

Other reserves at 1 February 2013 0.0 -0.1 -0.7 6.1 5.3

Capital decrease 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

Special reserve transferred to distributable reserves -162.5 0.0 0.0 0.0 -162.5

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 finan-

cial 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.



N OT E 7 . C H A N G E S I N C O N T I N G E N T A S S E T S A N D C O 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 pub-

lished Annual Report.

N OT E 8 . T R A N SAC T I O N S W I T H R E L AT E D PA RT 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

Board of Directors and Executive Board (and their related parties)

Holding of shares, in terms of number (balance) 26,519,562 *) 1,940,251 1,771,224

Obligation towards Executive Board, employee bonds (balance) 1.5 1.5 1.5

Fees for Board of Directors 1.2 1.8 1.4

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

Project finance loans from Board of Directors and Executive Board (balance) 0.0 21.7 10.0

Repayment, project finance loans from Board of Directors and Executive Board -20.7 0.0 0.0

Accrued interests, project finance loans from Board of Directors and Executive Board (balance) 0.0 0.3 0.0

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

Payables to joint ventures (balance) 107.1 88.4 90.6

Associates

Interest income from associates 0.3 0.4 0.3

Receivables from associates (balance) 23.8 23.6 20.8*) 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 S T R U M E N T S

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 instru-

ments measured at fair value as appearing from the Group’s Annual Report for 2012/13.

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 | COM PA N Y I N FO R M AT I O N

Aalborg

Vestre Havnepromenade 7

DK-9000 Aalborg

T: (+45) 8896 1010

Vilnius

Gynėjų str. 16

LT-01109 Vilnius

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

Stockholm

Gamla Brogatan 36-38

S-101 27 Stockholm

T: (+46) 8 751 37 30

Copenhagen

Islands Brygge 43

DK-2300 Copenhagen S

T: (+45) 3336 0170

C O M PA N Y I N F O R M AT I O N

TK Development A/S

CVR no.:

24256782

ISIN code:

DK0010258995 (TKDV)

Municipality of registered office:

Aalborg, Denmark

Website:

www.tk-development.com

e-mail:

[email protected]

Executive Board:

Frede Clausen and Robert Andersen

Board of Directors:

Niels Roth, Peter Thorsen, Per Sønder-

gaard Pedersen, Arne Gerlyng-Hansen,

Kim Mikkelsen and Morten Astrup.

The Group’s missionThe overall mission of TK Development is to create added value by de-

veloping real property. The Group is a development and service enter-

prise specialising in being the productive and creative liaison between

tenants and investors.

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