11 Aug 2008 07:00
PALM HILLS DEVELOPMENT CO. S.A.E AND ITS SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
30 JUNE 2008 (UNAUDITED)
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF PALM HILLS DEVELOPMENT CO. S.A.E AND ITS SUBSIDIARIES
Introduction
We have reviewed the accompanying interim condensed consolidated balance sheet of Palm Hills Development Company S.A.E and its Subsidiaries (the "Company") as at 30 June 2008 and the related interim condensed consolidated statements of income, changes in equity and cash flows for the six-month period then ended and explanatory notes. Directors are responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting ("IAS 34"). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Our report does not extend to the unaudited financial information in respect of the 6 month period ended 30 June 2007 and we express no opinion in respect of that financial information.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.
Nabil Istanbouli
Date: 27 July 2008
Egypt
CONSOLIDATED INCOME STATEMENT 30 June 2008 (Unaudited)
| Three months ended | Six months ended | |||
| 2008 | 2007 | 2008 | 2007 | |
| EGP | EGP | EGP | EGP | |
| Sales, net | 441,136,494 | 70,959,927 | 765,877,480 | 79,867,166 |
| Cost of sales | (132,249,720) | (25,254,663) | (197,964,207) | (29,654,138) |
| ─────── | ─────── | ─────── | ─────── | |
| GROSS PROFIT | 308,886,774 | 45,705,264 | 567,913,273 | 50,213,028 |
| Selling and administrative expenses | (52,224,718) | (21,608,079) | (87,362,342) | (26,619,793) |
| Interest income | 26,299,668 | 1,076,347 | 34,693,850 | 3,493,656 |
| Finance costs | (59,124,529) | (7,031,904) | (93,601,544) | (7,220,524) |
| Other income | 5,292,124 | 468,627 | 6,868,645 | 751,208 |
| ─────── | ─────── | ─────── | ─────── | |
| PROFIT BEFORE TAX | 229,129,319 | 18,610,255 | 428,511,882 | 20,617,575 |
| Income tax expense | (38,964,465) | - | (70,043,000) | - |
| ─────── | ─────── | ─────── | ─────── | |
| PROFIT FOR THE YEAR | 190,164,854 | 18,610,255 | 358,468,882 | 20,617,575 |
| ═══════ | ═══════ | ══════ | ═══════ | |
| Attributable to: | ||||
| Equity holders of the parent | 193,858,856 | 20,371,870 | 361,692,443 | 22,627,896 |
| Minority interests | (3,694,002) | (1,761,615) | (3,223,561) | (2,010,321) |
| ─────── | ─────── | ─────── | ─────── | |
| 190,164,854 | 18,610,255 | 358,468,882 | 20,617,575 | |
| ═══════ | ═══════ | ══════ | ═══════ | |
CONSOLIDATED BALANCE SHEET 30 June 2008 (Unaudited)
| Audited | ||
| 30 June 2008 | 31 December 2007 | |
| EGP | EGP | |
| ASSETS | ||
| Non-current assets | ||
| Property and equipment | 461,894,124 | 480,001,745 |
| Advance payments for investments acquisition | 120,121,743 | 108,371,833 |
| Other non current assets | 47,700,000 | - |
| Investment in an associate | 245,000 | 245,000 |
| Notes receivable | 1,416,060,456 | 626,227,375 |
| ─────── | ─────── | |
| 2,046,021,323 | 1,214,845,953 | |
| ─────── | ─────── | |
| Current assets | ||
| Notes receivable | 564,155,556 | 269,318,930 |
| Accounts receivable and prepayments | 226,077,036 | 107,432,145 |
| Bank balances and cash | 1,011,780,587 | 386,446,575 |
| Development properties | 3,785,859,548 | 3,768,299,778 |
| ─────── | ─────── | |
| 5,587,872,727 | 4,531,497,428 | |
| ─────── | ─────── | |
| TOTAL ASSETS | 7,633,894,050 | 5,746,343,381 |
| ═══════ | ═══════ | |
| EQUITY AND LIABILITIES | ||
| Attributable to equity holders of the parent | ||
| Share capital | 931,840,000 | 800,000,000 |
| Share premium | 985,920,000 | - |
| Statutory reserve | 13,635,814 | 13,635,814 |
| Retained earnings | 547,865,823 | 218,173,380 |
| ─────── | ─────── | |
| 2,479,261,637 | 1,031,809,194 | |
| Minority interests | 117,827,403 | 98,642,068 |
| ─────── | ─────── | |
| Total equity | 2,597,089,040 | 1,130,451,262 |
| ─────── | ─────── | |
| Non-current liabilities | ||
| Term loans | 268,103,543 | 3,260,042 |
| Land purchase liabilities | 1,679,798,806 | 1,855,505,706 |
| Notes payable and other non current liabilities | 267,020,533 | 114,836,677 |
| Deferred tax liability | 547,860 | 547,860 |
| ─────── | ─────── | |
| Total non-current liabilities | 2,215,470,742 | 1,974,150,285 |
| ─────── | ─────── | |
| Current liabilities | ||
| Bank overdrafts | 80,348,640 | 486,416,325 |
| Current portion of term loans | 247,763,773 | 182,930,278 |
| Current portion of land purchase liabilities | 469,031,710 | 413,012,763 |
| Accounts payable and accruals | 225,616,827 | 298,718,329 |
| Notes payable | 125,196,204 | 260,169,738 |
| Advances from customers | 620,807,982 | 534,362,792 |
| Deferred revenue | - | 98,627,724 |
| Billings in excess of costs | 1,052,569,132 | 367,503,885 |
| ─────── | ─────── | |
| 2,821,334,268 | 2,641,741,834 | |
| ─────── | ─────── | |
| Total liabilities | 5,036,805,010 | 4,615,892,119 |
| ─────── | ─────── | |
| TOTAL EQUITY AND LIABILITIES | 7,633,894,050 | 5,746,343,381 |
| ══════ | ══════ |
CONSOLIDATED STATEMENT OF CASH FLOWS 30 June 2008 (Unaudited)
| Six months ended 30 June | ||
| 2008 | 2007 | |
| EGP | EGP | |
| OPERATING ACTIVITIES | ||
| Profit before tax | 428,511,882 | 20,617,575 |
| Adjustments for: | ||
| Depreciation | 1,814,096 | - |
| Interest income | (34,693,850) | - |
| Finance cost | 93,601,544 | 7,220,524 |
| __________ | __________ | |
| 489,233,672 | 27,838,099 | |
| Working capital changes: | ||
| Notes receivable | (1,049,975,857) | (278,565,964) |
| Accounts receivable and prepayments | (116,134, 710) | (192,121,800) |
| Development properties | (162,386,921) | (43,595,700) |
| Accounts payable and accruals | (142,111,755) | (96,190,205) |
| Amounts due to related parties | - | 35,467,015 |
| Advances from customers | 86,445,191 | 508,782,777 |
| Billings in excess of costs | 685,065,247 | (85,255,173) |
| Deferred tax | - | (474,395) |
| __________ | __________ | |
| Cash from operations | (209,865,133) | (124,115,346) |
| Interest paid | (41,084,833 | (3,373,728) |
| __________ | __________ | |
| Net cash from (used in) operating activities | (250,949,966) | (127,489,074) |
| __________ | __________ | |
| INVESTING ACTIVITIES | ||
| Purchase of properties and equipment | (34,320,679) | (81,242,413) |
| Acquisition of subsidiaries (note 12) | - | 245,000 |
| Advance payments for investments acquisition | (120,121,743) | (126,318,935) |
| Available for sale investment | - | 25,000,000 |
| __________ | __________ | |
| Net cash used in investing activities | (154,442,422) | (182,316,348) |
| __________ | __________ | |
| FINANCING ACTIVITIES | ||
| Proceeds from shares issued | 99,840,000 | - |
| Proceeds from term loan | 264,843,502 | 182,244,566 |
| Payments for term loan | 64,833,495 | (939,004) |
| Proceeds from share premium | 985,920,000 | - |
| Amounts paid under capital increase by minorities | - | 93,000,000 |
| Minority share in the capital of subsidiaries | 21,357,088 | (2,014,308) |
| Acquisition of minority interests | - | - |
| ___________ | ___________ | |
| Net cash from financing activities | 1,436,794,085 | 272,291,254 |
| ___________ | ___________ | |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,031,401,697 | (37,514,168) |
| Cash and cash equivalents the beginning of the period | (99,969,750) | 230,310,319 |
| ___________ | ___________ | |
| CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 931,431,947 | 192,796,151 |
| ═══════ | ═══════ | |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 30 June 2008 (Unaudited)
| Attributable to equity holders of the parent | |||||||
| Share capital | Share Premium | Statutory Reserve | Retained earnings | Total | Minority interests | Total | |
| EGP | EGP | EGP | EGP | EGP | EGP | EGP | |
| At 1 January 2008 | 800,000,000 | - | 13,635,814 | 218,173,380 | 1,031,809,194 | 98,642,068 | 1,130,451,262 |
| Proceeds from shares issued | 99,840,000 | 985,920,000 | - | - | 1,085,760,000 | - | 1,085,760,000 |
| Share Dividends | 32,000,000 | (32,000,000) | - | ||||
| Minority share in capital of subsidiaries | - | - | - | - | - | 22,408,896 | 22,408,896 |
| Profit for the period | - | - | - | 361,692,443 | 361,692,443 | (3,223,561) | 358,468,882 |
| ___________ | __________ | ___________ | _________ | __________ | __________ | __________ | |
| At 30 June 2008 | 931,840,000 | 985,920,000 | 13,635,814 | 547,865,823 | 2,479,261,637 | 117,827,403 | 2,597,089,040 |
| ══════ | ══════ | ══════ | ══════ | ══════ | ══════ | ══════ | |
| At 1 January 2007 | 307,000,000 | - | 2,160,706 | 40,796,644 | 349,957,350 | 25,691,819 | 375,649,169 |
| Proceeds from shares issued | 93,000,000 | - | - | 93,000,000 | - | 93,000,000 | |
| Acquisition of minority interests | - | - | - | - | - | (3,987) | (3,987) |
| Profit for the period | - | - | - | 22,627,896 | 22,627,896 | (2,010,321) | 20,617,575 |
| ___________ | ___________ | ___________ | _________ | __________ | __________ | __________ | |
| At 30 June 2007 | 400,000,000 | - | 2,160,706 | 63,424,540 | 465,585,246 | 23,677,511 | 489,262,757 |
| ══════ | ═════ | ══════ | ══════ | ══════ | ══════ | ══════ | |
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 30 June 2008
1. ACTIVITIES
Palm Hills Development S.A.E ('the company') and its subsidiaries (together 'the group') is an investment property group with a portfolio in Egypt. It is principally involved in development of investment property.
The company is a joint stock company incorporated and domiciled in Egypt. The address of its registered office is 6th October City-Giza.
The company's shares are listed on the unofficial schedule number two of the Cairo and Alexandria stock exchange.
The company carries out its activities in the Egypt through the following entities:
-Palm Hills Development Company S.A.E ('the company')
The company is registered in Egypt under commercial registration number 6801 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th October City-Giza. The company is engaged in the investment in real estate and management of residential compounds, resorts, vials, sale and lease of property, construction of integrated projects and managing associated entertainment activities.
The company's fiscal year ended 31 December of each year.
-New Cairo for Real Estate Developments S.A.E
New Cairo for Real Estate Development S.A.E. is registered in Egypt under commercial registration number 12613 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in plot 36 South investors' area in new Cairo. The company is engaged in construction, management, and the sale of hotels, motels, buildings and residential compounds and the purchase, development, dividing and sale of land.
The company's fiscal year ended 31 December of each year.
-Royal Gardens for Real Estate Investment Company S.A.E
Royal Gardens for Real Estate Investment Company S.A.E. is registered in Cairo under commercial registration number 21574 under the provisions of under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 11 El-Nakhil Street - Dokki-Giza. The company is engaged in real estate investment in cities and new urban communities and the set up, execution, acquisition, and management of urban communities, resorts, villas and tourist villages through sale or lease. The company is also involved in all other types of related services such as finance leasing and construction.
The company's fiscal year ended 31 December of each year.
-Palm Hills Middle East Company for Real Estate Investment S.A.E and Its Subsidiary
Palm Hills Middle East Company for Real Estate Investment S.A.E and its subsidiary, Middle East Company for Real Estate and Touristic Investment S.A.E are engaged in real estate investment in new cities and urban communities, and also the construction, ownership and management of residential compounds, resorts, and villas. The company and its subsidiary are also involved in the sale and lease and other related services for managing integrated projects and entertainment activities.
The company is registered in Egypt under commercial registration number 21091. The company's subsidiary is registered in Egypt under commercial registration number 25016. Both companies are registered under the provisions of under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992.
The companies' fiscal year ended 31 December of each year.
-Middle East for Development and Investment Touristic S.A.E
Middle East for Development and Investment Touristic S.A.E. is registered in Egypt under commercial registration number 25015 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 40 Lebanon Street - Mohandessin- Giza.
The company is engaged in real estate investment in cities and new urban communities and the set up, execution, acquisition, and management of urban communities, resorts, villas and tourist villages through sale or lease. The company is also involved in all other types or relevant services such as finance lease and construction of the company's projects or others'.
The company's fiscal year ended 31 December of each year.
-Gamsha for Tourist Development S.A.E
Gamsha for Tourist Development S.A.E. is registered in Egypt under commercial registration number 23889 under the provisions of the Companies' Law No 159 of 1981. The company is located in 11 El Nakhil Street-Dokki-Giza. The company is engaged in real estate investments in new cities, urban communities, remote areas and regions outside the old valley.
The company's fiscal year ended 31 December of each year.
-Nile Palm Al-Naeem for Real Estate Development S.A.E
Nile Palm Al-Naeem for Real estate Development S.A.E. is registered in Egypt under commercial registration number 27613 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 40 Lebanon Street - Mohandessin- Giza. The company is engaged in real estate investment in new cities and urban communities, and also in the construction, ownership and management of residential compounds, resorts, and villas.
The company's fiscal year ended 31 December of each year.
- Saudi Urban Development Company S.A.E
Saudi Urban Development (Company) S.A.E. is registered in Egypt under commercial registration number 1971 under the provisions of the Companies' Law No 159 of 1981. The company is located in 72 Gamet El-Dewal El Arabia Street-Mohandeseen-Cairo. The company is engaged in the construction of advanced residential projects.
The company's fiscal year ended 31 December of each year.
-Rakeen Egypt for Real Estate Investment S.A.E
Rakeem Egypt for Real Estate Investment S.A.E. is registered in Egypt under commercial registration number 22996 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th of October City. The company is engaged in leasing, construction and operation of hotels, motels, resorts and residential compounds, construction, generation of electricity, desalination of water, land acquisition, dividing and constructing villas, residential units and offices malls and the marketing thereof..
The company's fiscal year ended 31 December of each year.
- Al Naeem for Hotels and Touristic Villages S.A.E
Al Naeem for Hotels and Touristic Villages S.A.E. is registered in Egypt under commercial registration number 32915 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th of October City. The company is engaged in construction and operation of hotels in Hamata.
The company's fiscal year ended 31 December of each year.
- Gawda for Trade Services S.A.E
Gawda for Trade Services S.A.E. is registered in Egypt under commercial registration number 10242 under the provisions of the Companies' Law No 159 of 1981. The company is located in 66 Gamet El-Dewal El Arabia Street-Mohandeseen-Cairo. The company is engaged in in real estate investments in new cities, urban communities, remote areas and regions.
The company's fiscal year ended 31 December of each year.
2. ACCOUNTING POLICIES
The interim condensed consolidated financial statements of the company are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The accounting policies used in the preparation of the interim condensed consolidated financial statements are consistent with those used in the preparation of the annual financial statements for the year ended 31 December 2007.
The interim condensed consolidated financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards. In addition, results for the 6 months ended 30 June 2008 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2008.
3. SHARE DIVIDENDS, SPLIT, ISSUANCE, PREMIUM AND EARNINGS PER SHARE
Share dividends
The Company's issued share capital was increased by EGP 32.0 million from profits carried forward to EGP 832.0 million, following the Extraordinary General Meeting held on 27 March 2008 and approval by the CMA on 17 April 2008.
Share split
The Extraordinary General Meeting approved a stock split, also approved by the CMA on 17 April 2008, increasing the number of Shares outstanding from 8 million to 416 million and decreasing the nominal value of each Share from EGP 100 to EGP 2.
Share issuance and premium
On 10 April 2008, the Extraordinary General Meeting approved the Closed Subscription and the issuance of the New Shares by 49,920,000 shares with nominal value of EGP 2 and Share Offer Price of EGP 21.75 with share premium of EGP 985.9 million.
The Company's issued and paid share capital was increased from EGP 832 million to EGP 931.8 million after the new issuance of shares.
Earnings per share
Earnings per share calculated on weighted average number of ordinary shares outstanding during the period of six months ended 30 June 2008 on 432,640,000 shares after share dividends, split and new issuance amounting to EGP 0.83 compare to EGP 0.64 (with the effect of share dividends and share split) as of 31 December 2007.
4. BUSINESS COMBINATIONS
During the second quarter 2008, Palm Hills Developments Company S.A.E. ('the company') acquired 100% and 60 % of Gawda for Trading Services S.A.E and Al Naeem for Hotels and Touristic Villages S.A.E respectively.
The assets and liabilities as of the date of acquisition arising from the acquisition are as follows:
| 30 June 2008 | 30 June 2008 | 31 December 2007 | 31 December 2007 | |
| Fair value recognised on acquisition | Acquirees' carrying amount | Fair value recognised on acquisition | Acquirees' carrying amount | |
| EGP | EGP | EGP | EGP | |
| Development properties | 129,740,563 | 55,715,926 | 1,316,179,521 | 410,036,261 |
| Notes receivable | 6,458,400 | 6,458,400 | ||
| Accounts receivable and prepayments | 2,510,182 | 2,510,182 | 11,897,670 | 11,897,670 |
| Cash and cash equivalents | 1,010,241 | 1,010,241 | 102,505,928 | 102,505,928 |
| ____________ | __________ | __________ | __________ | |
| Total assets | 133,260,986 | 59,236,349 | 1,437,041,519 | 530,898,259 |
| ____________ | __________ | ___________ | __________ | |
| Land purchase liability | (23,859,852) | (23,859,852) | (152,888,669) | (152,888,669) |
| Current portion of land purchase liability | (67,609,259) | (67,609,259) | ||
| Accounts payable and accruals | (8,409,326) | (27,824,689) | (100,664,474) | (100,664,474) |
| Notes payable | - | - | (7,803,000) | (7,803,000) |
| Advance from customers | - | - | (14,575,000) | (14,575,000) |
| Equity minority interests | (1,051,808) | (1,051,808) | (263,776,250) | (93,587,357) |
| ____________ | __________ | __________ | __________ | |
| (33,320,986) | (52,736,349) | (607,316,652) | (437,127,759) | |
| ____________ | __________ | __________ | __________ | |
| Net assets acquired | 99,940,000 | 6,500,000 | 829,724,867 | 93,770,500 |
| Total purchase consideration | 99,940,000 | - | 829,724,867 | - |
| ═══════ | ════ | ═════ | ═════ |
| 30 June 2008 | 31 December 2007 | |
| EGP | EGP | |
| Purchase consideration settled in cash | 99,940,000 | 829,724,867 |
| Cash and cash equivalents in subsidiaries acquired | (1,010,241) | (102,505,928) |
| ──────── | ──────── | |
| Cash outflow on acquisition from 31 December 2007 advances |
98,929,759 | 727,218,939 |
| ═══════ | ═════ |
5. TERM LOAN
Term Loan unsecured with net book value of EGP 330,000,000. It carriers interest at a rate of 11% and is repayable on five semiannual installments of EGP 66,000,000. The installments due starting from February 1, 2009 are shown as a current and non current liabilities.
6. GROUP ENTITIES
| 2008 | 2007 | 2006 | |
| % | % | % | |
| New Cairo for Real Estate Developments S.A.E | 74.9% | 74.9% | 74.9% |
| Royal Gardens for Real Estate Investment Company S.A.E | 51% | 51% | 51% |
| Palm Hills Middle East Company for Real Estate Investment S.A.E and its subsidiary, Middle East Company for Real Estate and Touristic Investment S.A.E | 99.95% 87.5% | 99.95% 87.5% | 51% - |
| Middle East for Development and Investment Touristic S.A.E | 58.75% | 58.75% | - |
| Gamsha for Tourist Development S.A.E | 59% | 59% | - |
| Nile Palm Al-Naeem for Real Estate Development S.A.E | 50% | 50% | - |
| Saudi Urban Development Company S.A.E | 51% | 51% | - |
| Rakeen Egypt for Real Estate Investment S.A.E | 97% | 97% | |
| Al Naeem for Hotels and Touristic Villages S.A.E | 60% | - | - |
| Gawda for Trade Services S.A.E | 100% | - | - |