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PHDC - Palm Hills Developments News Story

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Last Trade - 04/04/18

Sector
Financials
Size
Micro Cap
Market Cap £14.3m
Enterprise Value £214.0m
Revenue £236.1m
Position in Universe th / 1828

Palm Hills Develop - 2Q Results

Thu 10th August, 2017 8:36am
RNS Number : 6263N
Palm Hills Developments S.A.E.
10 August 2017

Palm Hills Developments achieves New Sales of EGP5.6 billion up from EGP3.0 billion last year, and record growth of 106% YoY in Net Profit after Tax & Minority Interest reaching EGP349 million, compared to EGP169 million in 1H2016

Cairo/London (August 10, 2017) - 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 June 30, 2017.

Key Highlights

The Company received an approval from the Board of Directors of the Egyptian New Urban Communities Authority ("NUCA") for the co-development of a mega integrated residential community spanning 12.6 million sqm (3,000 feddan) in West Cairo and expects to sign the co-development agreement during 2H2017.

"Hacienda West" was successfully launched and realized New Sales of EGP430 million during the last few days of June 2017. "The Crown" was also launched during the second quarter of 2017, with New Sales recording EGP420 million.

Monetization of non-core commercial assets remains on track with the successful launch and uptake of commercial units in Palm Central and Palm Valley Mall in West Cairo in April 2017, in addition to the sales generated by VGK Mall since its launch in FY2016, bringing total commercial sales to EGP774 million.

PHD concluded negotiations with lending banks with the purpose of reducing interest rates applicable to c.75% of the Company's outstanding debt balance. The reduction in interest rates will result in total savings of c.EGP100 million on financing costs to PHD over the tenor of the loans. The Company expects to finalize securitization transactions for receivables portfolio of c.EGP1 billion during 2H2017.

1H2017

New Sales ("Net") reached EGP5.6 billion, a growth of 85% YoY, of which EGP5.1 billion were generated by residential sales and EGP0.5 billion generated by the sale of commercial units. The growth in residential sales was largely supported by the continued demand for launched units in Palm Hills New Cairo coupled with robust uptake in the recently launched Hacienda West and The Crown. The number of units sold (residential and commercial) grew 55% YoY to mark 1,227 units, compared to 794 units sold during the same period last year.

Cash inflows from operations recorded EGP2.3 billion, a growth of 77% YoY. Construction earned value stood at EGP1.3 billion.

The Company handed over 885 units, a growth of 7% YoY driven by the ongoing accelerated construction program targeting to conclude all projects currently under developments over the next 18 month. 81% of handed over units were in Golf Extension, Village Gate, VGK, Palm Hills Katameya, Hacienda Bay and Hacienda White 2.

Revenue grew 49% YoY to EGP3.2 billion. Gross Profit stood at EGP945 million, a margin of 29%. While EBITDA remarkably grew by 89% YoY to record EGP629 million, a strong improvement in EBITDA margin to 19%, compared to 15% in 1H2016, the highest since 2014. Net Profit after Tax and Minority Interest increased 106% YoY to reach EGP349 million, a margin of 11%.

2Q2017

New Sales recorded 156% YoY growth to mark EGP2.5 billion. New residential sales recorded EGP2.0 billion while commercial sales stood at EGP0.5 billion during the quarter.

The Company handed over 467 units, a growth of 12% YoY.

Revenue grew 51% YoY to record EGP1.6 billion. While Gross Profit increased 60% YoY to EGP457 million. EBITDA stood at EGP305 million and recorded a growth of 114% YoY, with a strong 5pp improvement in margins to 18%, translating into 114% YoY growth in Net Profit after Tax and Minority Interest, reaching EGP137 million.

Yasseen Mansour, Chairman Comments:

I am very pleased to share with you our second quarter 2017 financial results, another strong quarter for the Company in terms of New Sales, profitability and handovers, backed by the ongoing healthy demand for our product offerings across all operating regions, the continued accelerated pace of construction, supported by our strong management team and improving financial position.

Despite the second quarter being usually the slowest in the year, we witnessed a remarkable 156% YoY growth in New Sales to record EGP2.5 billion, supported by new launches in West Cairo and North Coast, demand for available for sale inventory in projects nearing completion, coupled with strong uptake in recently launched commercial developments in West Cairo. New Sales for the first half of 2017 marked EGP5.6 billion, a growth of 85% YoY.

Looking at our recurring income and commercial real estate portfolio, we started to unlock value from non-core assets with the launch of Palm Valley Mall and Palm Central Office Building in West Cairo during the second quarter of 2017, with New Sales recording EGP493 million, with almost complete sell-out of available for sale office space in Palm Central. During the first half of 2017, our recurring income portfolio contributed 15% to Net Profits, driven by partial recovery in tourism with room occupancies remarkably improving in the Company's three operating hotels, coupled with profitable growth in Palm Club's operations.

While the market is still strong, we believe we are still gaining market share with 1,227 units sold during the first half of 2017. We handed over 885 homes during the first half of 2017, spent EGP1.3 billion on construction and generated EGP2.3 billion in cash from operations.

Our financial results for the first half of 2017 reflected our operational excellence with Revenue of EGP3.2 billion and EBITDA of EGP629 million, a growth of 49% and 89% respectively. Net Profit after Minority Interest grew 106% YoY to reach EGP349 million. Our Balance Sheet maintained its strong position with receivables of EGP13.3 billion, covering Net Debt 4 times.

We successfully concluded negotiations with some of the lending banks and were able to reduce the applicable interest rate to c.75% of the Company's outstanding debt balance. The reduction in interest rates will result in total savings of c.EGP100 million on financing costs to the Company. We remain committed to deleverage the Balance Sheet through our c.EGP2.5 billion securitization of receivables program over 2-3 years. We are still preparing for two securitization transactions which are expected to address receivables of c.EGP1 billion.

The Company concluded negotiations with the Egyptian New Urban Communities Authority ("NUCA") for the co-development of a mega integrated residential community spanning 12.6 million sqm (3,000 feddan) in West Cairo and received NUCA's Board of Directors' approval end of June 2017. Through this mega development, PHD expects to create 500k job opportunities and house up to 200k Egyptian citizens. The Company is currently finalizing the project's masterplan and expects to launch New Sales during the first half of 2018.

Given the strong market conditions and ongoing housing supply-demand mismatch, the Company remains on track to achieve its previously announced full year 2017 targets with New Sales of EGP9.5 billion.

Financial Review

EGP Million

2Q2017

2Q2016

Change

1H2017

1H2016

Change

Revenue

1,639

1,082

51%

3,228

2,162

49%

Gross Profit

457

285

60%

945

597

58%

Gross Profit margin

26%

26%

-

29%

28%

1pp

EBITDA

305

143

114%

629

333

89%

EBITDA margin

19%

13%

6pp

19%

15%

4pp

Net Profit before Tax & Minority Interest

250

143

76%

544

339

61%

Net Profit after Tax & Minority Interest

137

64

114%

349

169

106%

Net Profit margin

8%

6%

2pp

11%

8%

3pp

Net New Sales

2,513

981

156%

5,579

3,017

85%

During 1H2017, Revenue grew 49% YoY to reach EGP3.2 billion, driven by the increased pace of handovers, coupled with growth in volume and value of residential units sold, and delivered units in VGK Mall in East Cairo. The number of units sold reached 1,227 units, a growth of 55% YoY.

Gross Profit in absolute terms increased to EGP945 million, a growth of 58% YoY. Gross profit margin witnessed a modest growth of 1pp to 29% in 1H2017. SG&A/Revenue fell to 10% in 1H2017, compared to 12% during the same period last year. EBITDA grew 89% YoY to record EGP629 million, illustrating an EBITDA margin of 19% in 1H2017, compared to 15% in 1H2016, which is the strongest since FY2014.

Net Profit after Tax & Minority Interest increased 106% YoY to reach EGP349 million during 1H2017, despite the Company witnessing an increase in Minority Interest due to handover of units in Village Avenue and Village Gate Katameya coupled with revenue recognition in Palm Valley.

Revenue for the quarter grew 51% YoY to record EGP1.6 billion. Gross profit for the quarter grew 60% YoY to EGP457 million, with a stable margin of 26%. In 2Q2017, EBITDA and EBITDA margin came in at EGP305 million and 19% respectively, a growth of 114% and 6pp YoY. Net Profit after Tax & Minority Interest recorded EGP137 million, an increase of 114% YoY.

Net Debt/EBITDA stood at 2.7x at par with FY2016. By the end of 1H2017, Receivables recorded EGP13.3 billion compared to EGP11.3 billion by end of 2016, bolstered by the strong YoY growth in New Sales.

Operational Review

Healthy Sales Momentum driven by strong demand for residential and commercial real estate

Net1 New Sales for 1H2017 reached EGP5.6 billion, a growth of 85% YoY, of which EGP5.1 billion were generated by residential sales and EGP0.5 billion generated by the sale of commercial units. The growth in Net New Residential Sales was largely supported by the continued strong uptake of launched units in Palm Hills New Cairo (52% of Net New Sales in 1H2017) coupled with robust demand for the recently launched projects namely The Crown and Hacienda West.

During 2Q2017, Net New Sales recorded 156% YoY growth to cross the EGP2.5 billion mark. Net New Residential Sales recorded EGP2.0 billion while Net New Commercial Sales stood at EGP0.5 billion during the quarter.

The number of units sold grew 55% YoY to reach 1,227 units in 1H2017, compared to 794 units sold in 1H2016. Since the beginning of 2017, the Company increased its average selling prices by 68% and 47% YoY for BUA of standalone units and apartments, and 37% YoY for land.

In West Cairo, Net New Sales recorded EGP1.8 billion, of which EGP1.3 billion were boosted by demand for residential units in The Crown, which booked EGP420 million since the launch during 2Q2017, translating into 40 units, in addition to demand for commercial units following the successful launch of Palm Valley Mall and Palm Central (Office Building), with Net New Sales recording EGP362 million and EGP131 million by end of 1H2017.

These launches unlock significant value from the commercial land portfolio as Palm Hills Properties ("PHP"); the arm for commercial business continues to grow in the retail, commercial, educational, recreational club properties alongside hospitality. PHP's strategy continues to be focused on producing recurring revenue from strategic commercial land plots and sale of units in non-strategic land plots.Our recurring income from three hotels and commercial real estate segment contributed 15% to Net Profits, in line with our strategy to achieve 25% in Net Profits from recurring income by FY2020. The number of memberships in Palm Club stood at 2,497 memberships by end of 1H2017.

In East Cairo, Net New Sales grew by a remarkable 168% YoY to record EGP2.9 billion by end of 1H2017, mainly driven by strong demand for launched units in Palm Hills New Cairo, where Cumulative Net New Sales recorded EGP3.6 billion (900 units) since the project's launch back in November 2016. The Company sold commercial units worth EGP16 million in VGK Mall during 2Q2017.

In the North Coast, Net New Sales stood at EGP880 million during 1H2017, a significant growth of 305% YoY. We have seen a strong sales momentum with the beginning of the summer season and the launch of Hacienda West, which recorded Net New Sales of EGP430 million since launch late June 2017.

In 1H2017, the Company handed over 885 units including 467 units in the second quarter, a growth of 7% YoY and 12% QoQ respectively, positioning the Company well ahead its full year targeted handovers of 1,600 units. Construction activities are progressing on schedule, recording an earned value of EGP1.3 billion in 1H2017, a growth of 11% YoY.

Outlook

During 2H2017, we will continue to implement our accelerated construction program with the aim of increasing handovers and completing a number of projects currently under development during the current year namely Palm Hills Katameya, Palm Hills Katameya Extension, Casa and Hacienda White 2.

The Company expects to monetize receivables of up to c.EGP1 billion during 2H2017, in line with the planned securitization of receivables program, with a strategic objective of deleveraging the Balance Sheet.

The Company is currently finalizing the master plans of its co-development project in Alexandria and expects to launch reservations and sales in this project during 4Q2017.

Consolidated Income Statement 2

(Egyptian Accounting Standards)

In EGP 000's

2Q2017

2Q2016

%

1H2017

1H2016

%

Revenue

1,639,291

1,082,229

51%

3,228,252

2,161,839

49%

Cost of Revenue

(1,182,450)

(796,736)

48%

(2,282,996)

(1,564,912)

46%

Gross Profit

456,841

285,493

60%

945,256

596,927

58%

Gross Profit Margin

26%

26%

-

29%

28%

1pp

General Administrative, Selling and Marketing Expenses

(152,137)

(142,921)

6%

(316,395)

(263,711)

20%

EBITDA

304,704

142,572

114%

628,861

333,215

89%

EBITDA Margin

19%

13%

(6pp)

19%

15%

4pp

Administrative Depreciation

(5,062)

(2,743)

85%

(9,844)

(5,384)

83%

Operating Profit

299,642

139,829

114%

619,017

327,831

89%

Less:







Finance Cost & Interests

(39,287)

(1,246)

NA

(74,854)(3)

(1,854)

NA

Securitization of Notes Receivables

-

-

NA

(91,726)(4)

-

NA

Interest on Land Purchase Liabilities

(42,954)

(31,164)

38%

(53,125)

(56,315)

(6%)

Provisions

(1,757)

(11,475)

(85%)

(4,742)

(16,598)

(71%)

Add:







Recoverable Interest on Land Purchase Liabilities

-

-

-

82,824

-

-

Interest Income - Amortization of Discount on Notes Receivables

16,798

11,515

46%

33,596

23,031

46%

Gain from Held for Trading Investment

1,380

1,294

7%

2,924

2,709

8%

Interest Income

16,368

33,754

(52%)

29,969

59,501

(50%)

Net Profit Before Income Tax & Minority

250,189

142,507

76%

543,883

338,305

61%

Income Tax Expense

(38,163)

(34,210)

12%

(98,092)

(80,118)

22%

Deferred Tax

1,131

(362)

NA

1,059

(362)

NA

Net Profit After Tax

213,158

107,934

97%

446,849

257,825

73%

Non-Controlling Interest

(76,128)

(44,030)

73%

(97,511)

(88,494)

10%

Net Profit After Tax & Minority Interest

137,030

63,904

114%

349,337

169,331

106%

Net Profit After Tax & Minority Interest Margin

8%

6%

2pp

11%

8%

3pp

Consolidated Balance Sheet

(Egyptian Accounting Standards)

EGP Thousand

June 30, 2017

December 31, 2016

Long-Term Assets



Investments in Associates

79,858

79,226

Investment Property

887,631

888,506

Notes Receivable - Long Term

8,928,717

7,300,040

Projects Under Construction

880,484

877,767

Advance Payments for Investments Acquisitions

184,336

184,336

Fixed Assets (net)

347,397

351,608

Deferred Tax Asset

11,333

10,302

Other Long Term Assets

1,391

1,391

Employee stock ownership plan (ESOP)

73,156

81,287

Total Long-Term Assets

11,394,303

9,774,462

Current Assets



Works in Process

8,769,808

6,410,746

Held to Maturity Investments

242,243

153,328

Cash & Cash Equivalents

619,471

808,517

Notes Receivable - Short Term

3,552,894

3,295,528

Investments at Fair Value

49,462

58,471

Accounts Receivable

856,542

757,057

Suppliers - Advance Payments

562,907

489,064

Debtors & Other Debit Balances

386,932

218,477

Due from Related Parties

257,347

244,125

Guaranteed Payments - Joint Arrangements Partners

48,331

40,000

Total Current Assets

15,345,937

12,475,312

Total Assets

26,740,240

22,249,774

Current Liabilities



Banks - Credit Balances

111,351

42,176

Banks - Overdraft

171,755

79,410

Advances from Customers

8,743,999

7,744,755

Completion of Infrastructure Liabilities

95,083

95,083

Provisions

174,677

169,387

Current Portion of Land Purchase Liabilities

136,679

60,651

Investment Purchase Liabilities

44,257

44,257

Notes Payable - Short Term

1,064,716

974,302

Current Portion of Term Loans

444,096

541,015

Suppliers & Contractors

556,472

448,466

Income Tax Payable

109,593

126,629

Creditors & Other Credit Balances

682,543

522,256

Due to Joint Arrangements Partners

165,558

160,424

Due to related Parties

89,028

131,333

Total Current Liabilities

12,589,807

11,140,145

Working Capital

2,756,129

1,335,168

Total Investment

14,150,432

11,109,629

Financed as Follows:



Shareholders' Equity



Issued and Paid-In Capital

4,617,899

4,617,899

Legal Reserve

680,015

630,142

Special Reserve

524,213

524,213

ESOP Re-measurement Reserve

27,777

31,493

Retained Earnings (Deficit)

184,411

(222,479)

Net Profit for the Period/Year

349,339

639,795

Equity Attributable to Equity Holders of Parent Co.

6,383,653

6,221,064

Non-Controlling Interest

503,324

412,152

Total Shareholders' Equity

6,886,978

6,633,215

Long Term Liabilities



Land Purchase Liabilities

367,469

169,800

Notes Payable - Long Term

2,206,209

612,701

Other Long Term Liabilities - Residents' Association

886,176

736,444

Loans

3,340,278

2,957,470

Due to Joint Arrangements Partners

463,322

-

Total Long Term Liabilities

7,263,454

4,476,414

Total Equity & Long Term Liabilities

14,150,432

11,109,629

EGP Thousand

June 30, 2017

June 30, 2016

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

543,883

338,305

Administrative Depreciation

17,746

12,505

Provision Formed

4,742

1,854

Securitization ofReceivables Interest

91,726

-

Interest on Land Purchase Liabilities

53,125

56,315

Finance Costs & Interest

74,854

16,598

Gain on Disposal of Property & Equipment

-

(35)

Share of Profit/Loss of Associates

(632)

2,975

Gains on Investments in Fair Value through Profit or Loss

(2,924)

(2,709)

Interest Income

(29,969)

(59,501)

Recoverable Interest on Land Purchase liabilities

(82,824)

-

Interest Income - Amortization of Discount on Notes Receivables

(33,596)

(23,030)

Operating Profit Before Changes in Working Capital Items

343,277

Changes in Working Capital Items



Change in Work in Process

(1,998,866)

(336,796)

Change in Notes Receivables

(1,852,447)

(1,169,755)

Change in Investments in Fair Value through Profit or Loss

9,010

5,233

Change in Held-to-maturity Investments

(88,915)

461,974

Change in Accounts Receivable

(99,486)

(184,204)

Change in Suppliers - Advance Payments

(73,843)

35,603

Change in Debtors & Other Debit Balances

(168,455)

(53,392)

Change in Due to Related Parties

(13,222)

(45,872)

Change in Guaranteed Payments - Joint Arrangements

(8,331)

(90,000)

Change in Advances from Customers

999,244

613,096

Change in Completion of Infrastructure Liabilities

-

(80,767)

Provisions

549

(143)

Change in Due to Related Parties

(42,306)

(27,131)

Changes in Notes Payables

1,630,797

409,522

Change in Suppliers & Contractors

108,007

(58,119)

Income Tax Paid

(115,128)

(46,603)

Change in Creditors and Other Credit Balances

160,287

181,131

Change in Other Long Term - Residents' Association

149,732

99,764

Due to Joint Arrangements Partners

468,455

-

Net Cash (Used In) Operating Activities

(298,787)

56,820

Cash Flows from Investing Activities



Payments for Purchase of Fixed Assets

(16,333)

(14,053)

Proceeds from Sale of Fixed Assets

-

42

Proceeds from Payments for Projects Under Construction

(2,717)

(80,580)

Proceeds from Investments in Fair Value through Profit or Loss

2,924

2,709

Interest Received on Held to Maturity Investments

29,969

59,501

Cash Flows from Investing Activities

13,848

(32,381)

Cash Flows from Financing Activities



Banks - Credit Balances

69,174

895

Banks - Overdraft

92,345

(9,545)

Dividends

-

(368,630)

Adjustments to Retained Earnings

(183,033)

(146,821)

Proceeds from ESOP

4,415

-

Non-Controlling Interest - Dividends

(6,339)

(4,089)

Deferred Tax

28

43

Proceeds from Loans

(191,071)

-

Repayment of Loans

476,960

510,942

Securitization of Receivables Interest

(91,726)

-

Finance Costs & Interests

(74,854)

(16,599)

Net Cash Provided by Financing Activities

95,898

(33,805)

Net Increase in Cash & Cash Equivalents during the Period

(189,045)

(9,365)

Cash & Cash Equivalents at Beginning of the Period

808,516

965,669

Cash & Cash Equivalents as at 30 June 2017

619,471

956,304

About Palm Hills Developments

Palm Hills Developments, a leading real estate developer in Egypt, is a joint stock company established in 1997. Palm Hills builds integrated communities and has one of the most diversified land bank portfolios, spreading over 28.4 million square meters ("sqm") in Egypt, including 5 million sqm in Saudi Arabia. The Company's product offerings include primary homes on both West Cairo and East Cairo, as well as secondary homes by the Mediterranean Sea, North Coast.

As at end of 2Q2017, PHD delivered more than 7,236 units within its developments, including more than 2,165 units in 11 completed projects. Today, PHD has 12 projects under development, 6 projects in West Cairo, 4 projects in East Cairo and 2 projects in the North Coast, translating into a sales backlog exceeding EGP11.4 billion. In addition, the Company has 5 new projects including 4 co-developments. 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, Extensions 1504

Investor.relations@phdint.com


This information is provided by RNS
The company news service from the London Stock Exchange
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