28 Apr 2015 07:00
First Quarter 2015 Earnings Release
1Q 2015 Highlights
- Revenue grew 85% YoY to reach EGP 742 million, driven by the increase in sales of standalone units and improvements in construction revenue
- Gross Profit marked a 168% YoY improvement to EGP 330 million, alongside a 14 percentage point increase in Gross Profit Margin to 44.5%
- EBITDA increased 190% YoY to EGP 250 million
- Net Profit after Minority Interest increased 332% YoY to EGP 215 million
- Gross sales (reservations) increased 75% YoY to EGP 1.4 billion, driven by strong pre-sales in West Cairo and East Cairo projects as well as on the North Coast
- Contracted sales increased 101% YoY to EGP 1.2 billion
Cairo / London (April 28, 2015) - Palm Hills Developments S.A.E. ("PHD" or "the Company") (EGX: PHDC.CA, LSE: PHDC.LI), a leading real estate developer in Egypt, announces its consolidated financial and operating results for the quarter ending 31 March 2015.
Yasseen Mansour, Chariman Comments:
In the first quarter of 2015, we continued our focus on enhancing the Company's financial performance while also maintaining the quality for which we are well-known. These efforts were complemented by our successful sales strategy and marketing campaigns to boost performance across all projects.
During the quarter, the Company incurred construction costs of EGP 428 million and spent EGP 105 million on land payables. Efforts to expand our product portfolio and increase recurring revenue are an ongoing management focus, as we firmly believe that these are key to the long-term health of our Company and the creation of shareholder value.
During Egypt's Economic Development Conference held in March 2015, the Company signed two Memorandums of Understanding ("MOUs") with the objective of expanding our presence and projects portfolio in Egypt. A consortium led by PHD and Aabar Investment PJSC signed an MOU with the Egyptian Ministry of Housing, Utilities & Urban Communities ("the Ministry") for the exclusive co-development of an integrated community in 6th of October over a total area of 10,000 feddans. PHD signed another MOU with the Ministry for the exclusive co-development of an integrated project in East Cairo over a total area of 500 feddans.
The MOUs give the Company an exclusivity to finalize the definitive co-development agreements with the Egyptian government. Furthermore, during the quarter, the Company signed an MOU with Medinet Nasr Housing & Development ("MNHD") for the co-development of 103 feddans in East Cairo into an integrated mixed-use project through a revenue sharing scheme.
Revenue amounted to EGP 742 million for the quarter, driven by the increase in sales of standalone units and improvements in construction revenue. EBITDA marked an increase of 190% YoY to reach EGP 250 million with an EBITDA margin of 33.7%. Net Profit after Minority Interest stood at EGP 215 million, supported by strong growth in the top line alongside effective cost management and lower finance costs.
Key Financial Indicators
EGP Million | 1Q15 | 1Q14 | Change |
Revenue 1 | 742 | 400 | 85% |
Gross Profit | 330 | 123 | 168% |
Gross Profit Margin | 44.5% | 30.4% | 13.8pp |
EBITDA | 250 | 86 | 190% |
EBITDA Margin | 33.7% | 21.6% | 12pp |
Net Profit after Minority Interest | 215 | 50 | 332% |
Gross Sales (Reservations) | 1,358 | 775 | 75% |
Contracted Sales | 1,193 | 593 | 101% |
Financial Review
Revenue (net recognized sales) marked an increase of 85% YoY in 1Q 2015, reaching EGP 742 million, supported by the increase in sales of standalone units and increased pace of construction and deliveries across all of the Company's projects. On a project-by-project basis, the Katameya, Golf Views, Golf Extension and Woodville projects accounted for 57% of Revenue. Management also attributes revenue growth to an uptake in construction revenue from the Hacienda White I, Hacienda Bay, and Casa projects.
Gross Profit amounted to EGP 330 million, an increase of 168% YoY, supported by the increase in average selling price per square meter when compared to the YoY change in land and construction costs. Gross Profit Margin stood at 44.5%, an increase of 13.8pp.
Selling, General & Administrative expenses ("SG&A") increased to EGP 91 million in the quarter driven by the increase in sales commissions and marketing expenses associated with the Company's ongoing successful marketing campaigns. SG&A to Gross Sales only increased 1.2pp YoY to 6.7%.
EBITDA increased 190% YoY to EGP 250 million, translating to an EBITDA Margin of 33.7%.
Net Profit after Minority Interest stood at EGP 215 million, supported by strong growth in the top line alongside effective cost management and lower finance cost.
Net Debt for the first quarter of 2015 amounted to EGP 1.6 billion in comparison to EGP 1.5 billion at end of 2014. Net Debt / EBITDA stood at 1.6x, down from 2.9x by year end 2014, supported by EBITDA growth in 1Q 2015 alongside improvements in the Company's cash position.
Operational Review
Continued Healthy Sales Momentum
Gross Sales (Reservations), which are not yet recognized as revenue, grew 75% YoY to EGP 1.4 billion. Total number of units sold stood at 428 units compared to 338 units in the same period last year, mainly driven by the increase in sales of units in West Cairo and North Coast, where Palm Parks, Palm Hills Katameya and Hacienda Bay witnessed YoY increases of 119%, 1366% and 650% respectively in number of units sold.
This outstanding growth is attributable to a number of factors, most prominent of which is robust consumer confidence in the Company's brand and the uptake in construction activities throughout the Company's projects.
Outlook
The Company's management expects a robust performance for the upcoming financial periods. PHD is currently pursuing the aforementioned MOUs signed with both the Ministry of Housing and MNHD, whereas binding final contracts are expected to be finalized and signed during 2015; the Company also expects to finalize master layouts, obtain ministerial decrees, launch sales, and commence the development phase for some of these projects during 2015 and 2016.
The Company is also planning to enhance its recurring income portfolio, where the ongoing development of commercial projects has seen the Company successfully finalize more than 95% of construction activities related to Street 88 community mall, a 300-meter-long strip mall serving the Palm Hills October development, which will house basic community amenities including a polyclinic center. The mall is expected to become operational during 3Q 2015. Construction activities of phase 8 office building and Village Gate commercial malls are progressing as planned, and should be operational early 2016. Furthermore, the Company is undertaking vigorous renovation and restructuring initiatives with regards to Palm Club October, which shall include world-quality spa facilities.
The Company's consolidated financial statements for the period ending March 31, 2015, prepared in accordance with Egyptian Accounting Standards ('EAS'), are available for download. Please visit the company's website:
www.palmhillsdevelopments.com.
Palm Hills Development Consolidated Income Statement
(Egyptian Accounting Standards)
EGP | 1Q15 | 1Q14 | Change |
Revenues | 741,823,932 | 400,402,208 | 85% |
Cost of revenues | (411,698,416) | (277,419,421) | 48.4% |
Gross profit | 330,125,516 | 122,982,787 | 168% |
Margin % | 44.5% | 30.7% | 13.8 pp |
General administrative, selling and marketing expenses | (91,008,797) | (43,033,437) | 111% |
Other revenues | 10,996,682 | 6,435,786 | 71% |
EBITDA | 250,113,401 | 86,385,136 | 190% |
EBITDA Margin % | 33.7% | 21.6% | 12.1 pp |
Administrative depreciation | (2,073,861) | (2,443,526) | (15%) |
Operating Profit | 248,039,540 | 83,941,610 | 195% |
Less: | |||
Interest expenses - amortization of discount on land liability | (3,129,498) | (6,946,133) | (55%) |
Finance costs & interests | (2,867,947) | (13,812,287) | (79%) |
Interest on land purchase liabilities | (48,572,016) | (36,785,280) | 32% |
Total Expenses | (54,569,461) | (57,543,700) | (5.2%) |
Add: | |||
Palm Hills Club Operating profit (loss) | 1,400,714 | (1,292,239) | NA |
Gains on investments in fair value through profit or loss | 1,214,744 | 1,343,272 | (10%) |
Interest income - amortization of discount on notes receivables | 23,049,514 | 34,062,533 | (32%) |
Interest income | 75,718 | 181,785 | (58%) |
Total Revenues | 25,740,690 | 34,295,351 | (25%) |
Net Profit Before Income Tax | 219,210,769 | 60,693,261 | 261% |
Income tax expense | (1,186,049) | - | |
Deferred tax | (60,000) | (60,000) | - |
Net Profit after Tax | 217,964,720 | 60,633,261 | 259% |
Non-controlling interest | (3,264,093) | (10,910,198) | (70%) |
Net Profit after Tax & Minority Interest | 214,700,627 | 49,723,063 | 332% |
Margin % | 28.9% | 12.4% | 16.5 pp |
Palm Hills Development Consolidated Balance Sheet
(Egyptian Accounting Standards)
EGP | 31-March-15 | 31-Dec-14 |
Long-term Assets | ||
Investments in associates | 76,053,354 | 77,163,454 |
Investment property | 1,085,976,898 | 1,085,976,898 |
Held to maturity investments | 20,323,841 | 19,657,226 |
Notes receivable long term | 3,247,023,446 | 2,660,382,446 |
Projects under construction | 857,091,271 | 857,379,279 |
Advance payments for investments acquisition | 204,110,633 | 204,110,633 |
Fixed assets (net) | 312,016,514 | 312,468,739 |
Deferred tax asset | 3,861,616 | 3,998,815 |
Other long term assets | 1,390,734 | 1,390,734 |
Total long term assets | 5,807,848,307 | 5,222,528,224 |
Current Assets | ||
Works in process | 6,306,434,131 | 6,074,901,015 |
Cash and cash equivalents | 296,337,049 | 194,949,064 |
Notes receivable short term | 1,759,916,419 | 1,571,753,888 |
Investments at fair value through profit and loss | 60,325,109 | 56,856,080 |
Accounts receivable | 1,003,305,765 | 1,121,983,423 |
Suppliers - advance payments | 424,487,563 | 373,201,558 |
Debtors and other debit balances | 143,272,157 | 116,796,819 |
Due from related parties | 123,499,353 | 105,748,551 |
Total current assets | 10,117,577,546 | 9,616,190,398 |
Total Assets | 15,925,425,853 | 14,838,718,622 |
Current Liabilities | ||
Banks - credit balances | 57,170,345 | 39,197,560 |
Advances from customers | 5,560,763,379 | 5,001,684,303 |
Completion of infrastructure liabilities | 97,437,453 | 133,837,879 |
Provisions | 8,991,810 | 9,063,024 |
Current portion land purchase liabilities | 259,978,403 | 216,568,788 |
Due to related parties | 621,653,603 | 646,313,369 |
Investment purchase liabilities | 44,256,746 | 44,256,746 |
Notes payable short term | 802,299,106 | 805,227,757 |
Current portion of term loans | 199,781,000 | 174,410,000 |
Palm Hills Development Consolidated Balance Sheet Cont'd
(Egyptian Accounting Standards)
EGP | 31-March-15 | 31-Dec-14 |
Suppliers &contractors | 530,904,007 | 405,055,090 |
Income tax payable | 84,835,405 | 83,978,776 |
Creditors & other credit balances | 460,548,306 | 410,672,236 |
Total current liabilities | 8,728,619,562 | 7,970,265,528 |
Working capital | 1,388,957,984 | 1,645,924,870 |
Total investment | 7,196,806,291 | 6,868,453,094 |
Financed as follows: | ||
Shareholders' Equity | ||
Share capital | 2,696,640,000 | 2,696,640,000 |
Legal reserve | 567,561,718 | 566,469,569 |
Special reserve | 524,212,885 | 524,212,885 |
Retained deficit | 24,446,797 | (272,361,289) |
Net profit for the period | 214,700,627 | 353,290,475 |
Equity attributable to equity holders of the parent | 4,027,562,027 | 3,868,251,640 |
Non-controlling interest | 256,623,365 | 255,951,133 |
Total shareholders' equity | 4,284,185,392 | 4,124,202,773 |
Long-term Liabilities | ||
Land purchase liabilities | 408,687,261 | 350,433,822 |
Notes payable long term | 402,564,466 | 536,510,993 |
Other long term liabilities - residents' association | 422,059,132 | 395,362,285 |
Loans | 1,679,310,040 | 1,461,943,221 |
Total long term liabilities | 2,912,620,899 | 2,744,250,321 |
Total equity and non-current liabilities | 7,196,806,291 | 6,868,453,094 |
About Palm Hills Developments
Palm Hills Developments, a leading real estate developer in Egypt, is a joint stock company established in 1997. Palm Hills develops new urban communities and enjoys a land bank of more than 23 million square meters as well as investments in Egypt and Saudi Arabia. Palm Hills' strategy has enabled it to successfully shift from a single project company to become one of the most important and largest real estate developers in the Egyptian market, with 18 projects extending across the country. PHD is traded on the Egyptian Stock Exchange under the symbol (PHDC.CA), and on the London Stock Exchange, its GDRs are traded under the symbol (PHDC.LI). For more information visit: www.palmhillsdevelopments.com/
Investor Relations Contacts
Mamdouh Abdelwahab
Ahmed Nour El-Din Hassan
Tel +202 35351200, Extension 1503
Disclaimer
This presentation contains statements that could be construed as forward looking. These statements appear in a number of 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.