Annual Report 2017/18

SUMMARY

Strategic focus changed, asset sales to be accelerated and impairment losses recognised

In December 2017, the Board of Directors resolved to change TK Development’s strategic focus. Going forward, focus will be on the Danish and Swedish property development business, while efforts will be made to divest the Group’s other activities over a period of two years.

The main focus will be on urban development, housing, retail and business projects and often a combination of these segments. Going forward, Management does not expect to execute shopping centre projects that may expose TK Development to significant risk. The background to adjusting the segmentation is Management’s realisation that development and ownership of shopping centres has historically caused the Group substantial losses, and that shopping centre development is unlikely to generate satisfactory results in the future.

Due to these strategic measures and the wish to carry out asset sales earlier than previously planned, impairment losses totalling DKK 405 million were recognised on the Group’s asset management activities in Q3 2017/18.

The Board of Directors allocated equity of DKK 500 million to the property development segment as at 31 October 2017. This is considered an appropriate amount of equity for the Group's future property development activities, and the goal is to achieve an annual return on equity of 15-20% before tax.

As a result of the above, the Polish activities were transferred to the asset management business, and the Group’s asset management activities were subsequently renamed discontinuing activities.

As previously announced, the net proceeds from the divestment of these activities will be distributed to the shareholders.

Financial performance in 2017/18

The result before tax for 2017/18 was a loss of DKK 372.3 million*) against a profit of DKK 13.0 million*) in 2016/17. The full-year performance was in line with the Group’s most recent guidance.

The result breaks down into a profit of DKK 39.6 million from the property development business, which is generally experiencing a high level of activity, and a loss of DKK 411.9 million from the discontinuing activities.

The result after tax was a loss of DKK 379.0 million against a profit of DKK 7.1 million for 2016/17.

Total assets amounted to DKK 2,271.1 million at 31 January 2018 against DKK 2,852.9 million at 31 January 2017. Consolidated equity stood at DKK 922.8 million compared with DKK 1,293.7 million at 31 January 2017, for a solvency ratio of 40.6%.

Profit guidance for 2018/19

For financial year 2018/19, Management expects a consolidated profit of DKK 80-90 million before tax.

The target of a return on equity in the property development segment of 15-20% p.a. before tax is maintained, and fulfilment of this target is reflected in the Group’s profit guidance.
             
The profit guidance is based on Management's expectations, including timing estimates, for a number of specific projects, of which several have been presold and are currently in progress.

*) Adjusted for tax included in Income from investments in joint ventures.

Any questions regarding this annual report may be directed to Executive Vice President Robert Andersen, tel. +45 8896 1010.

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