13 Aug 2015 08:20
2Q2015 Earnings Release
Cairo/London (August 13, 2015) - Palm Hills Developments S.A.E. ("PHD" or "the Company") (EGX: PHDC.CA, PHDC.LI), a leading real estate developer in Egypt, announces its consolidated financial and operating results for the quarter ending 30 June 2015.
Key Highlights
2Q2015
§ Revenue for the quarter grew to EGP729 million, an increase of 65% YoY ("Year over year"), mainly driven by the increase in recognized land revenue relating to contracted standalone units alongside improvements in construction revenue, as the Company successfully delivered 351 units in 2Q2015.
§ Gross Profit increased to EGP296 million, a growth of 90% YoY, supported by recognition of revenue from higher-margin units. Gross Profit Margin rose 5.3 p.p. to 40.6%.
§ EBITDA grew 85% YoY to EGP208 million, an EBITDA margin of 28.5%.
§ Net Profit after Minority Interest stood at EGP431 million, a growth of 409% YoY.
§ Gross sales (reservations) increased 29% YoY to EGP1.2 billion, driven by strong pre-sales in Golf extension and Woodville (West Cairo) and Hacienda Bay (North Coast).
§ Contracted sales increased 43% YoY to EGP0.9 billion, mainly due to the increase in sales YoY in Golf extension, Palm Hills Katameya (East Cairo), and Haceinda Bay.
1H2015
§ Revenue rose to EGP1.47 billion, a growth of 75% YoY, resulting from stronger pace of construction year to date, and recognized land revenue from standalone units. The Company delivered 607 units on the back of accelerated construction works worth EGP953 million.
§ Gross Profit achieved a remarkable growth of 125% YoY to EGP626 million, supported by the faster increase in average selling prices per square meter in comparison to change in construction costs.
§ EBITDA remarkably increased 132% YoY to record EGP459 million, with an EBITDA margin of 31%.
§ Net Profit after Minority Interest recorded 381% YoY growth, reaching EGP646 million.
§ Gross sales grew to EGP2.6 billion, an increase of 49% YoY, supported by a doubling level of reservations in Golf extension and Woodville, as well as quadrupling reservations in Palm Hills Katameya and Hacienda Bay.
§ Contracted sales grew 71% YoY to EGP2.1 billion.
Yasseen Mansour, Chairman Comments:
During the second quarter of 2015, we continued our focus on enhancing the Company's financial performance and position through an ongoing implementation of our four strategic pillars namely growth, earnings stabilization and diversification, improving profitability and expediting project delivery.
We successfully completed the EGP1.65 billion Rights Issue of 824 million new ordinary shares, a strong evidence of the sustained trust and commitment from our shareholders and the strong interest from new investors, with new shareholders coming onboard from the United States, United Kingdom, and United Arab Emirates. Post closing, the Company's Share Capital increased from EGP2.7 billion to EGP4.3 billion, distributed over 2.2 billion shares. On July 27, 2015, trading of the new ordinary shares commenced on the EGX and LSE.
As part of the Company's strategy to reconfigure its land bank by exiting land plots that are not within its future development plans and acquiring land adjacent to existing projects or in strategic areas which PHD aims to develop imminently, on June 1, 2015, the Company announced the signature of three agreements, a land sale agreement of 13,000 sqm plot in downtown Alexandria, previously acquired through an auction from an Egyptian bank, a land purchase agreement of 126,000 sqm plot adjacent to Hacienda Bay, North Coast, and a land sale agreement of 252,000 sqm plot located in North Coast, previously purchased from "WIPCO" COOP. Through these agreements, the Company became entitled to net proceeds of EGP481 million, representing a capital gain on sale of EGP426 million.
On July 5, 2015, PHD and Madinet Nasr Housing & Development ("MNHD") signed a co-development agreement of an integrated residential community spreading over 433,643 sqm in MNHD's 5.5 million sqm project, KM45 in East Cairo. Through this agreement, PHD will be responsible for all construction, development, marketing and sales activities, while MNHD will be contributing the land alongside all associated external infrastructure. The project will be developed over four phases and is expected to offer 2,600 - 2,900 apartments with a built up area of up to 484,100 sqm, translating into an estimated revenue ranging between EGP4.6 billion to EGP5.5 billion. PHD will be entitled to revenue share of 64%, with MNHD holding the balance.
To expedite projects' delivery, the Company's wholly owned subsidiary, Palm Hills Middle East for Real Estate Investments inked EGP750 million syndicated medium term loan agreement for Hacienda Bay with the National Bank of Egypt, Banque Misr and Arab African International Bank. The loan will be partially directed towards refinancing an existing revolving credit facility previously granted by Banque Misr to the subsidiary by a maximum of EGP330 million and the balance will be utilized in accelerating the pace of development in Hacienda Bay, and reducing the project's completion timeline by approximately two years, ending during the fourth quarter of 2017 instead of 2019.
Key Financial Indicators
EGP Million | 2Q2015 | 2Q2014 | Change | 1H2015 | 1H2014 | Change |
Revenue | 729 | 441 | 65% | 1,471 | 842 | 75% |
Gross Profit | 296 | 156 | 90% | 626 | 278 | 125% |
Gross Profit Margin | 40.6% | 35.3% | 5.3pp | 42.6% | 33.1% | 9.5pp |
EBITDA | 208 | 112 | 85% | 459 | 197 | 132% |
EBITDA Margin | 28.5% | 25.4% | 3.1pp | 31.2% | 23.4% | 7.8pp |
Net Profit after Minority Interest | 431 | 85 | 409% | 646 | 134 | 381% |
Gross Sales (Reservations) | 1,238 | 962 | 29% | 2,596 | 1,738 | 49% |
Contracted Sales | 897 | 629 | 43% | 2,091 | 1,221 | 71% |
Financial Review
Revenue (net recognized sales)2 for the quarter grew 65% YoY, reaching EGP729 million, supported by an increase in recognized land revenue relating to contracted standalone units, where the number of land plots sold increased 58% YoY, with average selling prices hiking 22% YoY, alongside an accelerated pace of construction and deliveries across the Company's 13 projects. Revenue for 1H2015 stood at EGP1.47 billion, a remarkable growth of 75% YoY.
On a project-by-project basis, Palm Hills Katameya, Golf Views, Golf Extension and Casa projects accounted for almost 59% of revenue, whereby approximately 75% of construction revenue was generated by Hacienda White-1, Hacienda Bay, and Casa projects.
Gross Profit for the quarter rose 90% YoY to EGP296 million, driven by the recognition of revenue from higher-margin units compared to the corresponding direct costs. Gross Profit Margin stood at 40.6%, an increase of 5.3pp YoY. Gross Profit for 1H2015 increased 125% YoY to EGP626 million.
In 2Q2015, EBITDA almost doubled YoY to reach EGP208 million (2Q2014: EGP112 million), an EBITDA margin of 28.5%, as a direct impact of lower Cost of Sales/Revenue. EBITDA for 1H2015 remarkably increased by 132% YoY to record EGP459 million.
Net Profit after Minority Interest for the quarter marked 409% YoY growth reaching EGP 431 million, supported by capital gains on sale of non-strategic land plots in North Coast and Alexandria alongside the double digit growth in the top line. Net Profit was negatively impacted by a provision of EGP99 million, which was set forth during the second quarter of 2015, for certain phases of projects in which sales are already closed, while construction activities are still ongoing, in anticipation of potential increase in construction cost. Net Profit after Minority Interest for 1H2015 amounted to EGP646 million, an increase of 381% YoY.
Net Debt for the second quarter of 2015 amounted to EGP1.8 billion in comparison to EGP 1.5 billion as at end of 2014. Net Debt/EBITDA stood at 1.97x, down from 2.9x by year end 2014, supported by EBITDA growth in 2Q2015 alongside improvements in the Company's cash position.
By end of 2Q2015, Receivables amounted to EGP5.8 billion; compared to EGP4.2 billion by end of 2014, supported by strong sales achieved year to date.
Operational Review
Continued Healthy Sales Momentum
Gross sales (reservations), which are not yet recognized as revenue, increased 29% YoY to EGP1.2 billion in 2Q2015, driven by strong pre-sales in Golf extension and Woodville and Hacienda Bay, on the back of increasing demand for the latter as its beachfront almost doubled to 800 meters, from 450 meters previously - following the recent purchase of 126,000 sqm of land adjacent to the project. Gross sales for 1H2015 stood at EGP2.6 billion, an increase of 49% YoY, supported by a doubling level of reservations in Golf extension and Woodville, as well as quadrupling reservations in Palm Hills Katameya and Hacienda Bay.
In 2Q2015, Contracted sales increased 43% YoY to EGP0.9 billion, mainly due to increased sales YoY in Golf extension, Palm Hills Katameya and Haceinda Bay. Contracted sales grew 71% YoY to EGP2.1 billion by end of 1H2015. During the quarter, the Company sold 457 units, with a total of 885 units sold by end of 1H2015.
Such growth is attributed to ongoing sales & marketing efforts, an increase in sales and average selling prices per square meter of land and built up areas; along with an uptake in construction activities throughout our projects, with total construction works worth EGP953 million, complemented by strong customers' confidence.
Outlook
The Company is currently witnessing a healthy real estate market with high demand for its North Coast projects, where summer sales are going strong, especially after the recent launch of "Water Villas" in Hacienda Bay, 68 awe-inspiring water villas, 8 stunning seafront villas and 135 upscale cabanas. PHD is currently working closely with MNHD's management team on finalizing various aspects relating to the co-development of 433,643 sqm in MNHD's 5.5 million sqm project, KM45 in East Cairo, in order to launch pre-sales before end of 2015.
The Company is in the process of enhancing its recurring income portfolio, following the successful closing of the EGP1.65 billion Rights Issue. The Company successfully finalized all 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. Construction activities of phase 8 office building and Village Gate commercial malls are progressing as planned.
Management expects pre-sales for FY2015 to exceed EGP5 billion, in comparison to the previous estimate of EGP4.2 billion.
Consolidated Income Statement
(Egyptian Accounting Standards)
In EGP 000’s
| 2Q2015
| 2Q2014
| Change
| 1H2015
| 1H2014
| Change
|
Revenue | 729,374 | 441,292 | 65% | 1,471,198 | 841,695 | 75% |
Cost of revenue | (433,322) | (285,391) | 52% | (845,021) | (563,638) | 50% |
Gross profit | 296,052 | 155,901 | 90% | 626,177 | 278,057 | 125% |
Margin % | 40.6% | 35.33% | 5.3 pp | 42.56% | 33.04% | 9.5 pp |
General administrative, selling and marketing expenses | (99,560) | (52,520) | 90% | (190,569) | (94,726) | 101% |
Other revenue | 11,181 | 8,771 | 27% | 23,578 | 13,914 | 69% |
EBITDA | 207,673 | 112,152 | 85% | 459,187 | 197,245 | 133% |
EBITDA Margin % | 28.47% | 25.41% | 3.1 pp | 31.21% | 23.43% | 7.8 pp |
Administrative depreciation | (2,154) | (2,377) | (9%) | (4,228) | (4,820) | (12%) |
Operating Profit | 205,519 | 109,776 | 87% | 454,959 | 192,425 | 195% |
Less: | ||||||
Interest expenses - amortization of discount on land liability | (3,130) | (6,946) | (55%) | (6,259) | (13,892) | (55%) |
Finance costs & interests | (27,563) | (18,764) | 47% | (30,431) | (32,576) | (7%) |
Interest on land purchase liabilities | (59,886) | (34,448) | 74% | (108,458) | (71,233) | 52% |
Provision | (99,662) | (182) | NA | (99,662) | (182) | NA |
Total Expenses | (190,241) | (60,340) | 215% | (244,810) | (117,884) | 108% |
Add: | ||||||
Gains on investments in fair value through profit or loss | 1,134 | 1,132 | 0% | 2,348 | 2,475 | (5%) |
Interest income - amortization of discount on notes receivables | 23,050 | 34,063 | (32%) | 46,099 | 68,125 | (32%) |
Interest income | 707 | 1,935 | (63%) | 782 | 2,117 | (63%) |
Capital gains on investment property | 425,736 | - | NA | 425,736 | - | NA |
Total Revenue | 450,625 | 37,130 | 1,114% | 474,965 | 72,718 | 553% |
Net Profit Before Income Tax | 465,904 | 86,566 | 438% | 685,114 | 147,259 | 365% |
Income tax expense | (9,226) | (452) | - | (10,412) | (452) | - |
Deferred tax | (140) | (60) | - | (200) | (120) | - |
Net Profit after Tax | 456,538 | 86,054 | 430% | 674,503 | 146,687 | 360% |
Non-controlling interest | (25,293) | (1,339) | 1,789% | (28,557) | (12,249) | 133% |
Net Profit after Tax & Minority Interest | 431,245 | 84,715 | 409% | 645,945 | 134,438 | 381% |
Margin % | 59.13% | 19.20% | 39.9 pp | 43.91% | 15.97% | 27.9 pp |
Consolidated Balance Sheet
(Egyptian Accounting Standards)
EGP 000’s
| June 30, 2015
| Dec 31, 2014 |
Long-Term Assets | ||
Investments in Associates | 77,366 | 77,163 |
Investment Property | 854,665 | 1,085,977 |
Held to Maturity Investments | 31,952 | 19,657 |
Notes Receivable - Long Term | 5,222,735 | 2,660,382 |
Projects Under Construction | 842,860 | 857,379 |
Advance Payments for Investments Acquisitions | 204,111 | 204,111 |
Fixed Assets (net) | 326,079 | 312,469 |
Deferred Tax Asset | 3,722 | 3,999 |
Other Long Term Assets | 1,391 | 1,391 |
Total Long-Term Assets | 7,564,880 | 5,222,528 |
Current Assets | ||
Works in Process | 6,703,447 | 6,074,901 |
Cash & Cash Equivalents | 430,354 | 194,949 |
Notes Receivable - Short Term | 589,392 | 1,571,754 |
Investments at Fair Value | 52,747 | 56,856 |
Accounts Receivable | 826,101 | 1,121,983 |
Suppliers - Advance Payments | 458,371 | 373,202 |
Debtors & Other Debit Balances | 182,263 | 116,797 |
Due from Related Parties | 148,942 | 105,749 |
Total Current Assets | 9,391,618 | 9,616,190 |
Total Assets | 16,956,498 | 14,838,719 |
Current Liabilities | ||
Banks - Credit Balances | 36,517 | 39,198 |
Advances from Customers | 5,802,626 | 5,001,684 |
Completion of Infrastructure Liabilities | 76,584 | 133,838 |
Provisions | 108,629 | 9,063 |
Current Portion of Land Purchase Liabilities | 223,238 | 216,569 |
Due to Related Parties | 607,183 | 646,313 |
Investment Purchase Liabilities | 44,257 | 44,257 |
Notes Payable - Short Term | 888,623 | 805,228 |
Current Portion of Term Loans | 446,512 | 174,410 |
Suppliers & Contractors | 554,403 | 405,055 |
Income Tax Payable | 92,987 | 83,979 |
Creditors & Other Credit Balances | 393,206 | 410,672 |
Total Current Liabilities | 9,274,766 | 7,970,266 |
Working Capital | 116,853 | 1,645,925 |
Total Investment | 7,681,733 | 6,868,453 |
Financed as Follows: | ||
Shareholders' Equity | ||
Issued and Paid-In Capital | 2,696,640 | 2,696,640 |
Legal Reserve | 584,508 | 566,470 |
Special Reserve | 524,213 | 524,213 |
Retained Earnings (Deficit) | (535) | (272,361) |
Net Profit for the Period/Year | 645,945 | 353,290 |
Equity Attributable to Equity Holders of Parent Co. | 4,450,771 | 3,868,252 |
Non-controlling Interest | 266,160 | 255,951 |
Total Shareholders' Equity | 4,716,931 | 4,124,203 |
Long Term Liabilities | ||
Land Purchase Liabilities | 365,818 | 350,434 |
Notes Payable - Long Term | 401,356 | 536,511 |
Other Long Term Liabilities - Residents' Association | 439,306 | 395,362 |
Loans | 1,758,323 | 1,461,943 |
Total Long Term Liabilities | 2,964,802 | 2,744,250 |
Total Equity & Long Term Liabilities | 7,681,733 | 6,868,453 |
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 sqm 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
Palm Hills Developments
Mamdouh Abdelwahab
Ahmed Nour El-Din Hassan
Tel +202 35351200, Extension 1503
Investor.relations@phdint.com
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.