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PHDC - Palm Hills Developments News Story

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Financials
Size
Micro Cap
Market Cap £14.6m
Enterprise Value £219.0m
Revenue £241.7m
Position in Universe th / 1818

Palm Hills Develop - 1st Quarter Results

Mon 29th June, 2020 7:00am
RNS Number : 2910R
Palm Hills Developments S.A.E.
28 June 2020
 

PHD achieve New Sales of EGP1.7 billion during 1Q2020, despite the postponement of new launches, cancelled marketing events and the COVID-19 pandemic's negative impact on the property market and customers' spending

Cairo/London (June 28, 2020) - Palm Hills Developments S.A.E. ("PHD" or "the Company") (EGX: PHDC.CA, PHDC.LI), a leading real estate developer in Egypt, announce its consolidated financial and operating results for the financial period ended March 31, 2020.

Key Highlights

·    Despite the postponement of new launches, cancelled marketing events and the COVID-19 pandemic's negative impact on the property market and customers' spending, PHD's New Sales (Residential and Commercial) stood at EGP1.7 billion (261 units) during 1Q2020, which represents a growth of 39% YoY, should we remove Palm Hills Alexandria's Expression of Interest of EGP1 billion from 1Q2019 New Sales. Commercial New Sales amounted to EGP209 million during 1Q2020, largely driven by the sale of office space in Golf Central for EGP106 million.

·    Revenue grew 18% YoY to EGP1.1 billion during 1Q2020, compared to EGP958 million during the same period last year. Gross Profit increased 10% YoY to EGP392 million in 1Q2020, compared to EGP356 million during the same period last year. PHD maintained a healthy Gross Profit margin of 35% in 1Q2020, as opposed to 37% in 1Q2019. The YoY decrease in Gross Profit margin resulted mainly from the handover of lower margin units during 1Q2020. EBITDA stood at EGP204 million, a margin of 18% during 1Q2020. Net Profit after Tax and Minority Interest amounted to EGP81 million, implying a Net Profit margin of 7%.

·    As part of the leverage optimization program, PHD inked EGP505 million credit facility with Ahli United Bank Egypt during January 2020, to refinance some of its existing debt on Palm Parks at a competitive financing package. The Loan will refinance outstanding balance of the existing facility on Palm Parks, in addition to funding the project's updated investment cost and remaining construction works to speed up the project's completion.

·    Last week, the Company inked a medium-term syndicated facility of EGP365 million with Arab African International Bank and Banque Misr, with better financing terms, after paying off an existing facility, which led to c.2% lower Interest Expenses. Said facility will mostly finance the remaining investment cost of Hacienda Bay.

·    PHD spent EGP368 million on construction activities during 1Q2020. In Badya, the development of 155 villas was 50% completed. The Company concluded all construction works in Golf Extension, Woodville, Palm Valley, completed 60% of The Crown zone A, and commenced construction of Palm Parks's zone C. Furthermore, PHD started the development of the first 15 villas in Palm Hills Alexandria.

·    Looking at handovers, the Company delivered 135 residential and commercial units during 1Q2020 mainly in the following projects: Capital Gardens, Golf Extension, Woodville, Palm Hills Katameya and Hacienda Bay. Handovers were negatively impacted by the COVID-19 pandemic and delays from customers in receiving their units, as the Company had an additional 610 units released from construction during the period.

·    The Company inked co-development agreement of a mixed-use community in a prime location in Ain Sokhna with Al Shorouk for Touristic Developments during June 2020. The project spreads over 116 feddan with 1.5 km beachfront and will be developed over five phases. It is expected to offer 1,201 units representing a built-up area of up to c.163,655 sqm. PHD recently launched sales and reservations of the first phase which is currently witnessing a healthy demand despite the challenging property market conditions.

 

Yasseen Mansour, Chairman & Group CEO Comments:

 

·    Despite starting 2020 with operational momentum, the increasingly evolving COVID-19 pandemic has negatively impacted humanity and life as we know it. Social distancing, precautionary measures put in place by the Egyptian government, curfews and closure of non-essential business activities, coupled with the growing concerns around health and macro-economic matters, have all contributed to the slowdown in the number of homebuying transactions and handovers of finished products notably since March 2020. Nevertheless, we sold 261 units for EGP1.7 billion during 1Q2020, which represents a growth of 39% YoY, should we remove Palm Hills Alexandria's Expression of Interest of EGP1 billion from 1Q2019 New Sales.

 

·    We have prioritized the health, safety and wellbeing of our staff, clients and contractors while ensuring business continuity. We have business continuity protocols that allow us to continue our day-to-day activities while adjusting to the new normal. We deployed a work from home policy and now running at 50% capacity of employees at various premises and 100% capacity at construction sites, complemented by various necessary precautionary and safety measures in all construction sites, sales offices and headquarters. In April 2020, we placed one of our hotel properties under the supervision of the Egyptian Ministry of Health to confront COVID-19, coupled with EGP5 million of financial aid, in addition to addressing the needs of 10,000 affected families by EGP2.5 million. We are facilitating several medical services to support our residents within our living communities including the sterilization of homes within our developments, distribution of health kits with personal protective equipment plus standby doctors' support free of charge, as well as fulfilling various medication requests, consultancy, scans and blood test services.

 

·    As the magnitude and duration of COVID-19 impact on the property market and customers' behaviors can't be precisely quantified at this point, we have decided to cut our previously announced guidance for FY2020. We expect a reduction in New Sales target by 20% to c.EGP12 billion for the full year, instead of EGP15 billion, as we have always met and surpassed our targets during the last 7 years. We continue to assess and monitor our capital allocation priorities, whereby we reduced our SG&A expenditures by 10-15% and budgeted construction spending to EGP1.2 billion, to ensure we close the year with a healthy positive Cash Flow from Operations of c.EGP0.5 billion excluding securitization.

 

·    We expect to engage in securitization transactions for a gross receivables portfolio of c.EGP1.5 billion during 2H2020. As at end of 1Q2020, the Company's Cash and Cash Equivalents amounted to EGP2.0 billion, while Net Debt amounted to EGP2.2 billion. We expect to finish the year with a Net Debt of c.EGP1.5 billion. Our Receivables recorded EGP21.7 billion, covering Net Debt 10 times in 1Q2020.

 

·    We are pleased to announce signing a Memorandum of Understanding and setting up a joint venture with CI Capital's minority-owned investment Taaleem Management Services, Egypt's leading higher education platform, with the purpose of establishing a higher education campus in Badya. The campus further cements Badya's positioning as an integrated development that address all its residents' needs and cater to others living in West Cairo. We believe Taaleem is the right partner with its proven track record and solid credentials.

 

 

 

·    The Board of Directors has approved a voluntary delisting of our Depositary Receipts' program from the London Stock Exchange, to trade only over the counter, subject to shareholders' approval in the next Extraordinary General Assembly.

 

·    Capitalizing on our credibility, brand equity, resilient and geographically diversified portfolio of projects, the hard work and dedication of employees, we are confident of our ability to overcome the current challenging circumstances, as we have steered through difficult business cycles in the past 21 years and emerged much stronger. At PHD, we build everything for the long-term. The COVID-19 pandemic does not change that.

 

Financial Review

              

·    Revenue grew 18% YoY to EGP1.1 billion in 1Q2020, compared to EGP958 million during 1Q2019. Gross Profit increased 10% YoY to EGP392 million in 1Q2020, compared to EGP356 million during the same period last year. PHD maintained a healthy Gross Profit margin of 35% in 1Q2020, as opposed to 37% in 1Q2019. The YoY decrease in Gross Profit margin resulted mainly from the handover of lower margin units during 1Q2020.

 

·    While EBITDA amounted to EGP204 million, a margin of 18% in 1Q2020, compared to 23% during the same period last year, mostly due to an increase in Marketing Expenses of projects that were postponed due to the current circumstances, such as West Lane, Palm Park's commercial strip mall. Net Profit after Tax and Minority Interest amounted to EGP81 million in 1Q2020, a decrease of 42% YoY, implying a Net Profit margin of 7%.

 

·    Net Debt amounted to EGP2.2 billion by end of 1Q2020, with Receivables of EGP21.7 billion solidifying our Balance Sheet where Receivables cover Net Debt 10 times. Net Debt/EBITDA stood at 2.7 times by end of 1Q2020.

 

Operational Review

 

·    New Sales (Residential and Commercial) amounted to EGP1.7 billion in 1Q2020, despite the postponement of new launches, cancelled marketing events and the COVID-19 pandemic's negative impact on the property market and customers' spending. Should we remove Palm Hills Alexandria Expression of Interest of EGP1 billion from 1Q2019, New Sales would have shown a growth of 39% YoY in 1Q2020. The Company sold 261 units during 1Q2020 mainly in Badya, The Crown, Palm Hills Alexandria, Palm Hills New Cairo, Hacienda White 2 and Golf Central. Said projects accounted for c.67% of 1Q2020 New Sales or EGP1.1 billion (210 units). Commercial New Sales stood at EGP209 million, of which 51% were driven by the sale of office space in Golf Central. The Company postponed the launch of West Lane strip Mall from 1Q2020 to take place later this year, should the current circumstances and market condition allow for it.

 

·    In West Cairo, New Sales amounted to EGP1 billion, of which EGP0.8 billion was generated from the sale of residential units across all the projects, with the balance generated by the commercial segment. The largest contributors to residential sales were The Crown, Badya, and Golf Extension, where the latter seen notable contribution following the Ready to Move campaign which was relaunched during 1Q2020. While Commercial New Sales were largely driven by Golf Central, as it generated EGP106 million, followed by The Lane (EGP40 million).  In East Cairo, New Sales amounted to EGP0.2 billion in 1Q2020, mainly in Palm Hills New Cairo.

 

·    North Coast and Alexandria recorded New Sales of EGP0.5 billion during 1Q2020, mainly in Palm Hills Alexandria and Hacienda White 2. By end of 1Q2020, Palm Hills Alexandria's cumulative sales stood at EGP3.6 billion since its launch. PHD handed over 135 residential and commercial units during 1Q2020 mainly in the following projects: Capital Gardens, Golf Extension, Woodville, Palm Hills Katameya and Hacienda Bay. Handovers were negatively impacted by COVID-19 pandemic and delays from customers in receiving their units, as the Company had an additional 610 units released from construction during the period.

 

 

Consolidated Income Statement 2

(Egyptian Accounting Standards)

 

 

In EGP 000's

1Q2020

1Q2019

%

Revenue

1,135,029

958,083

18%

Cost of Revenue

(742,509)

(602,038)

23%

Gross Profit

392,519

356,045

10%

Gross Profit margin

35%

37%

(2pp)

General Administrative, Selling and Marketing Expenses

(188,540)

(137,416)

37%

EBITDA

203,980

218,628

(7%)

EBITDA margin

18%

23%

(5pp)

Administrative Depreciation

(23,495)

(20,764)

(13%)

Operating Profit

180,485

197,864

(9%)

Less:

 

 

 

Finance Cost & Interests

(61,593)

(54,864)

12%

Securitization of Notes Receivables

-

(8,099)

NA

Interest on Land Purchase Liabilities

(26,801)

(81,574)

(67%)

Provisions

-

68,663

NA

Add:

 

 

 

Interest Income - Amortization of Discount on Notes Receivables

4,280

22,359

(81%)

Gain from Held for Trading Investment

9,435

45,468

(21%)

Interest Income on Held to Maturity Investments

2,333

2,947

(79%)

Net Profit Before Income Tax & Minority Interest

108,139

192,764

(44%)

Income Tax Expense

(23,422)

(37,669)

(38%)

Deferred Tax

(122)

(119)

3%

Net Profit After Tax

84,595

154,977

(45%)

Non-Controlling Interest

(3,332)

(13,816)

(76%)

Net Profit After Tax & Minority Interest

81,263

141,161

(42%)

Net Profit After Tax & Minority Interest margin

7%

15%

(8pp)

 

 

 

 

 

 

 

 

Consolidated Balance Sheet

(Egyptian Accounting Standards)

 

 

EGP Thousand

March 31, 2020

December 31, 2019

 Long-Term Assets

 

 

 Investments in Associates

145,196

143,370

 Investment Property

390,333

393,483

 Notes Receivable - Long Term

15,438,900

15,318,677

 Projects Under Construction

1,748,572

1,739,437

 Advance Payments for Investments Acquisitions

194,702

194,907

 Fixed Assets (net)

1,342,937

1,353,869

 Deferred Tax Asset

3,427

3,549

 Employee Stock Ownership Plan

41,730

68,172

  Other Long - Term Assets

1,391

1,391

Total Long - Term Assets

19,307,395

19,216,854

 Current Assets

 

 

 Works in Process

7,993,582

8,115,250

 Held to Maturity Investments

1,035,917

924,376

 Cash

878,578

1,375,178

 Notes Receivable - Short Term

4,911,126

4,691,813

 Investments at Fair Value

70,709

87,513

 Accounts Receivable

1,367,796

1,272,279

 Suppliers - Advance Payments

446,406

451,528

 Debtors & Other Debit Balances

1,010,295

917,361

 Due from Related Parties

428,350

418,965

 Total Current Assets

18,142,762

18,254,266

 Total Assets

37,450,157

37,471,118

 Current Liabilities

 

 

 Banks - Credit Balances

64,402

87,238

 Banks - Overdraft

974,193

963,312

 Advances from Customers

14,621,303

14,212,609

 Completion of Infrastructure Liabilities

58,063

95,083

 Provisions

180,179

180,718

 Current Portion of Land Purchase Liabilities

169,969

235,683

 Notes Payable - Short Term

1,363,900

1,750,902

 Current Portion of Term Loans

412,001

295,133

 Suppliers & Contractors

951,280

762,160

 Income Tax Payable

111,122

97,622

 Creditors & Other Credit Balances

694,795

630,784

 Due to Joint Arrangements Partners

1,258,046

1,081,182

 Due to related Parties

6,639

6,639

 Total Current Liabilities

20,865,894

20,399,065

 Working Capital

(2,723,131)

(2,144,802)

 Total Investment

16,584,263

17,072,053

 Financed as Follows:

 

 

 Shareholders' Equity

 

 

 Issued and Paid-In Capital

6,235,199

6,235,199

 Legal Reserve

778,473

738,358

 Special Reserve

176,513

176,513

 Treasury Shares

(46,990)

-

 ESOP Re-measurement Reserve

(36,270)

(9,828)

 Retained Earnings

1,593,551

995,811

 Net Profit for the period

81,262

846,785

 Equity Attributable to Equity Holders of Parent Co.

8,781,740

8,982,838

 Non-Controlling Interest

549,280

554,742

 Total Shareholders' Equity

9,331,019

9,537,581

 Long Term Liabilities

 

 

 Land Purchase Liabilities

219,309

150,258

 Notes Payable - Long Term

1,258,529

1,438,142

 Other Long-Term Liabilities - Residents' Association

2,492,012

2,372,856

 Loans

2,771,142

2,801,073

 Due to Joint Arrangements Partners

512,251

772,143

 Total Long-Term Liabilities

7,253,247

7,534,472

 Total Equity & Long-Term Liabilities

16,584,264

17,072,053

 

 

 

 

 

 

Cash Flow Statement

(Egyptian Accounting Standards)

 

 

EGP Thousand

March 31, 2020

March 31, 2019

Net Profit for the Period (Before Income Tax & Non-Controlling Interest)

108,139

192,764

Interest on Land Purchase Liabilities

26,801

81,574

Administrative Depreciation

28,733

25,540

Provision Formed

-

1,476

Finance Costs & Interest

61,593

54,864

Interest on Discounted Receivables

-

8,099

Share of Profit/Loss of Associates

7,307

1,706

Gain (loss) on Disposal of Fixed Assets

(25)

(2)

Interest Income - Amortization of Discount on Notes Receivables

(4,280)

(22,358)

Gains on Investments in Fair Value through Profit or Loss

(2,333)

(2,946)

Provisions no Longer Required

-

(70,139)

Gains and losses on Held to Maturity Investments

(9,435)

(45,468)

Operating Profit Before Changes in Working Capital Items

216,499

225,108

Cash flow from Operating Activities

 

 

Change in Work in Process

127,055

(210,449)

Change in Notes Receivables

(335,256)

1,032,723

Change in Investments in Fair Value through Profit or Loss

16,803

5,162

Change in Held to Maturity Investments

(111,540)

888,303

Change in Accounts Receivable

(95,516)

(18,688)

Change in Suppliers - Advance Payments

5,122

15,021

Change in Debtors & Other Debit Balances

(92,934)

(249,961)

Change in Due from Related Parties

(9,384)

(14,813)

Change in Advances from Customers

408,693

(449,907)

Provisions

(538)

(898)

Change in Due to Related Parties

6

407

change in Notes Payables

(593,416)

(321,215)

Change in Suppliers & Contractors

189,119

(150,475)

Income Tax Paid

(9,922)

51

Change in Creditors and Other Credit Balances

64,011

(23,480)

Change in Other Long Term - Residents' Association

119,156

74,717

Change in Guaranteed Payments - Joint Arrangements

(83,027)

(64,603)

Change in Completion of Infrastructure

(37,021)

-

Net Cash (Used In) Operating Activities

(222,001)

737,005

Cash Flows from Investing Activities

 

 

Payments for Purchase of Fixed Assets

(16,293)

(6,968)

Proceeds from Sale of Fixed Assets

163

21

Payments for Associates Investment

(9,133)

(50,000)

Payments for Projects Under Construction

(9,135)

(1,026)

Payments Advance for Investments

(547)

(1,719)

Proceeds from Investments in Fair Value through Profit or Loss

2,333

2,947

Proceeds from Held to Maturity Investments

9,435

45,468

Cash Flows from Investing Activities

(23,177)

(11,277)

Cash Flows from Financing Activities

 

 

Credit Balance

(22,835)

10,591

Banks - Overdraft

10,880

2,746

Treasury Shares

(46,990)

-

Adjustments to Retained Earnings

(208,930)

(63,509)

Minority Interests

(8,794)

(9,789)

Non-Controlling Interest - Dividends

-

-

Deferred Tax

-

3

Proceeds from Loans

411,548

49,634

Repayment of Loans

(324,611)

(460,115)

Finance Costs & Interests

(61,592)

(62,963)

Net Cash Provided by Financing Activities

(251,324)

(533,403)

Net Cash Flow During the Period

(496,599)

192,321

Cash & Cash Equivalents at Beginning of the Period

1,375,178

955,737

Cash & Cash Equivalents as at March 31, 2020

878,578

1,148,058

 

 

 

 

 

 

About Palm Hills Developments

Palm Hills Developments ("PHD"), a leading real estate developer in Egypt, is a joint stock company established in 1997. The Company builds integrated communities and has one of the most diversified land bank portfolios, spreading over 42.3 million square meters ("sqm"). PHD's product offerings include primary homes on both West Cairo and East Cairo, as well as secondary homes in the North Coast (Mediterranean Sea) and Ain Sokhna (Red Sea).

 

As at end of 1Q2020, PHD delivered 10,746 units within its developments. Today, PHD has 9 projects under development, 3 projects in West Cairo, 3 projects in East Cairo and 3 projects in the North Coast and Alexandria, in addition to 7 new projects including 6 co-developments, translating into a sales backlog of c.EGP15 billion. PHD is one of the most liquid and actively traded stocks on the Egyptian Stock Exchange and is traded under the symbol "PHDC.CA". The Company has a GDR listing on the London Stock Exchange and is traded under the symbol "PHDC.LI".  For more information, please visit: www.palmhillsdevelopments.com/

 

 

Investor Relations Contacts

Mamdouh Abdelwahab

Radwa Abu Elnaga

Tel +202 35351200, Extension 1504 

Investor.relations@phdint.com   

Disclaimer

 

 

 

 

This presentation contains statements that could be construed as forward looking. These statements appear in several places in this presentation and include statements regarding the intent, belief or current expectations of the number of units to be delivered, construction spending, projects' timelines and estimates regarding future growth of the business, financial results and other aspects of the activity and situation relating to the Company. Such forward looking statements are no guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. You are cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date of this presentation, which is not intended to reflect Palm Hills Developments business or acquisition strategy or the occurrence of unanticipated events.


This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
 
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