2 Nov 2017 07:55
Palm Hills Developments realizes record Revenue of EGP4.8 billion, Net Profit of EGP467 million in 9M2017. New Sales grew 44% YoY to reach EGP8.1 billion
Cairo/London (November 2, 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 September 30, 2017.
Key Highlights
· The Company concluded one of the most important milestones in its long term history of achievements by signing the co-development agreement of the Oasis project with NUCA, spreading 12.6 million sqm in West Cairo, which is a quantum leap for the Company moving it from developing integrated communities to developing small cities and expanding its land bank to 41 million sqm. The Company expects to launch sales of the first phase during 1H2018.
· The Company concluded discounting transaction of Receivables portfolio of EGP124.5 million with Arab African International Bank, with net proceeds of EGP89.1 million. The proceeds were utilized mainly in debt repayment and partial refinancing of the related projects.
· The North Coast had a strong summer season supported by the launch of Hacienda West in June 2017, the project booked sales of EGP979 million since launch and until end of 3Q2017.
· 9M2017
· New Sales for 9M2017 reached EGP8.1 billion, a growth of 44% YoY, of which EGP7.6 billion were generated from residential sales and EGP519 million from the sale of units in non-core commercial assets. More than 64% of new residential sales were generated by Palm Hills New Cairo, The Crown and Hacienda West. The number of units sold (residential and commercial) grew 23% YoY to 1,709 units, up from 1,385 units sold during the same period last year.
· Cash inflow from operations recorded EGP3.5 billion, a growth of 65% YoY. Construction earned value stood at EGP1.7 billion.
· The Company handed over 1,340 units, on track to realize FY2017 target of 1,600 units, 86% of handed over units was in Palm Parks, Golf Extension, Palm Hills Katameya, Village Gate, Hacienda Bay and Hacienda White 2.
· Revenue grew 30% YoY to EGP4.8 billion, while Gross Profit grew 32% YoY to record EGP1.5 billion, a margin of 31%. EBITDA improved 34% YoY reaching EGP938 million, with a margin of 20%. Net Profit after Tax and Minority Interest increased 16% YoY to EGP467 million, a margin of 10%. Bottom line was negatively impacted by EGP116 million one offs associated with securitization and discounting of Receivables during 1Q & 3Q 2017, and YoY increase in land liabilities.
· 3Q2017
· New Sales decreased 6% YoY to EGP1.9 billion (365 units) mainly due to an early start for the summer season with a portion of North Coast sales booked during June 2017 and the halt of additional commercial units' sales during the quarter.
· The Company handed over 455 units, mostly in Hacienda Bay, Hacienda White 2, Village Gate, Golf Extension and Palm Parks.
· Revenue and Gross Profit seen a minor growth of 3% YoY with a flat Gross Profit margin of 35%, due to the change in mix of units/projects sold which were mostly apartments, chalets and cabanas. While EBITDA witnessed a drop of 16% YoY to EGP309 million, on the back of higher SG&A expenses YoY in absolute terms due to the increase in sales incentives and commissions resulting from strong sales performance driven by the conversion of pending reservations into contracts during the quarter (42% growth YoY), alongside costs associated with the preparations for the launch of Oasis project.
· Net Profit was negatively impacted by the YoY increase in land liabilities, minority interest, interest charges coupled with the EGP25 million one off hit related to the discounting of Receivables transaction, leading to a bottom line of EGP118 million.
Yasseen Mansour, Chairman Comments:
I am very pleased to share with you our third quarter 2017 financial results, a period in which we have seen healthy residential sales, stable profitability margins and solid handovers, supported by the ongoing demand and uptake of our products offerings across all operating regions, backed by our strong management team and healthy financial position.
During 9M2017, New Sales grew 44% YoY to reach EGP8.1 billion supported by growth in volume and value of units sold in recently launched projects. While the market is still going strong, we believe we are still gaining market share with 1,663 residential units sold during the period. Despite the challenging market conditions post the floatation of Egyptian Pound and the resulting inflation, we still expect sales growth during the rest of FY2017, mainly buoyed by launched inventory in Palm Hills New Cairo, Hacienda West and The Crown, keeping us on track to achieve our full year target of EGP9.5 billion in New Sales.
We handed over 1,340 units, spent EGP1.7 billion on construction and generated EGP3.5 billion in cash flows from operations. We have completed all construction works in the Village Gate, Village Avenue and Casa during the first half of 2017 and expect to conclude Hacienda White 2 before year end, as we previously promised.
Our financial results for 9M2017 reflected our operational excellence with Revenue of EGP4.8 billion, Gross Profit of EGP1.5 billion and EBITDA of EGP938 million, a growth of 30%, 32%, 34% YoY respectively. Net Profit after Minority Interest grew 16% YoY to EGP467 million. Our Balance Sheet maintained its strong position with receivables of EGP14.4 billion, covering Net Debt 4.4 times.
We continue to closely monitor our construction cost which increased 20% since beginning of FY2017, in comparison to our selling prices which recorded a YoY growth of 40% for land, 60% and 36% for Built Up Area of standalone units and apartments respectively.
With regards to our recurring income and commercial real estate portfolio, the segment contributed 17% to Net Profit, in line with our strategy to generate 25% in Net Profit from recurring income by FY2020.
We successfully concluded a discounting transaction of receivables portfolio worth EGP124.5 million related to handed over units, with Arab African International Bank, at a discount rate of 19.8% translating to EGP24.7 million during the third quarter of 2017 with the proceeds mainly utilized in debt repayment, as part of the Company's commitment to deleverage the Balance Sheet through its Securitization of Receivables Program.
Following the closing of the co-development agreement of the Oasis project, spreading 12.6 million sqm in West Cairo, which we consider as a quantum leap for the Company moving it from development integrated communities to developing small cities, we are finalizing the project's master plan in anticipation of launching the first phase during 1H2018.
Financial Review
·
Revenue | 1,529 | 1,485 | 3% | 4,757 | 3,656 | 30% |
Gross Profit | 531 | 517 | 3% | 1,476 | 1,118 | 32% |
Gross Profit margin | 35% | 35% | - | 31% | 31% | - |
EBITDA | 309 | 366 | (16%) | 938 | 700 | 34% |
EBITDA margin | 20% | 25% | (5pp) | 20% | 19% | 1pp |
Net Profit before Tax & Minority Interest | 174 | 343 | (49%) | 718 | 682 | 5% |
Net Profit after Tax & Minority Interest | 118 | 235 | (50%) | 467 | 404 | 16% |
Net Profit margin | 8% | 16% | (8pp) | 10% | 11% | (1pp) |
During 9M2017, Revenue grew 30% YoY to reach EGP4.8 billion, driven by the increased pace of handovers, 59% of which was in Hacienda Bay (27% of handovers), Village Gate (21% of handovers) and Golf Extension (11% of handovers), coupled with growth in standalone units sold in new projects namely in Palm Hills New Cairo (12% of top line), Hacienda West (1% of top line), The Crown (4% of top line) as well as handed over commercial units (Village Gate Katameya Mall in East Cairo), coupled with EGP110 million contribution from core commercial assets (3 Hotels & Palm Club in West Cairo). The number of units sold in 9M2017 stood at 1,709 units, a growth of 23% YoY.
Gross Profit edged up to EGP1.5 billion, a growth of 32% YoY. However, Gross Profit margin remained relatively flat at 31% in 9M2017. SG&A/Revenue stood at 11.3% in 9M2017 (11.4% in 9M2016), yet decreased as a percentage of New Sales to 6.6% (7.4% in 9M2016). EBITDA grew 34% YoY to record EGP938 million, with an EBITDA margin of 20% in 9M2017, up from 19% during the same period last year.
Net Profit after Tax & Minority Interest increased 16% YoY to reach EGP467 million during 9M2017, despite the Company witnessing an increase in Minority Interest, negative impact of higher finance cost YoY and one offs associated with discounting and securitization of Receivables.
Looking into the third quarter of 2017, Revenue and Gross Profit seen a minor growth of 3% YoY with a flat Gross Profit margin of 35%, due to the change in mix of units/projects sold which were mostly apartments, chalets and cabanas, coupled with 27% YoY decrease in handed over units to 455 homes as FY2017 target is 1,600 units versus 2,049 units handed over during FY2016.
EBITDA for the third quarter of 2017 decreased 16% YoY mainly on the back of higher SG&A in absolute terms due to the increase in sales incentives and commissions resulting from strong sales performance driven by the conversion of pending reservations into contracts during the quarter (42% growth YoY), alongside costs associated with the preparations for the launch of Oasis project. Net Profit for the quarter was negatively impacted by the YoY increase in land liabilities, higher interest charges coupled with the EGP25 million hit relating to the recent discounting of Receivables transaction.
Net Debt/EBITDA stood at 2.6 times, down from 2.8 times in FY2016. By the end of 9M2017, Receivables reached EGP14.4 billion compared to EGP11.3 billion by end of FY2016, driven by the strong sales growth, covering Net Debt 4.4 times.
Operational Review
On track to achieve EGP9.5 billion of sales in FY2017
New Sales for 9M2017 reached EGP8.1 billion, a growth of 44% YoY, of which EGP7.6 billion were generated from residential sales and EGP519 million from the sale of commercial units in The Lane (formerly known as Palm Valley Mall), Palm Central and Village Gate Katameya Mall. Palm Hills New Cairo project continues to be the largest contributor to residential sales, followed by strong uptake of secondary homes with the launch of Hacienda West in June 2017.
During 3Q2017, New Sales decreased 6% YoY to EGP1.9 billion (365 units) mainly due to fewer launched inventory in West Cairo when compared with last year, coupled with an early start of the summer season with a portion of North Coast sales booked during June 2017 and the halt of additional commercial units' sales.
The number of units sold during 9M2017 increased 23% YoY to 1,709 units, compared to 1,385 units during the same period last year. Since the beginning of 2017, the Company increased its average selling prices by 60% and 36% YoY for BUA of standalone units and apartments, and 40% YoY for land.
In West Cairo, New Sales recorded EGP2.4 billion during 9M2017, driven by demand for residential units in The Crown coupled with commercial units' sales in The Lane and Palm Central. New Sales for 3Q2017 decreased 28% YoY to EGP376 million, of which EGP175 million were generated by The Crown. The drop in New Sales resulted from lower available for sale inventory in West Cairo during 3Q2017.
In East Cairo, New Sales grew by a remarkable 149% YoY to record EGP3.8 billion by end of 9M2017. Growth was driven by stellar sales performance in Palm Hills New Cairo where Cumulative New Sales since the project launch to date reached EGP4.3 billion (1,031 units). New Sales for 3Q2017 grew 151% YoY to EGP573 million, mostly from sales in Palm Hills New Cairo and Capital Gardens. The Company sold commercial units worth EGP14 million in Village Gate Katameya Mall during 3Q2017.
In the North Coast, New Sales stood at EGP1.9 billion during 9M2017, an increase of 19% YoY. The region witnessed solid performance during the summer season supported by the launch of Hacienda West in June 2017 which booked aggregate sales of EGP979 million by end of 9M2017. New Sales decreased 24% YoY to EGP976 million during 3Q2017, as a result of early summer season starting in June 2017 and hence some shift in secondary homes sales to 2Q2017.
In 9M2017, the Company handed over 1,340 units including 455 units during the third quarter, on track to meet FY2017 target of 1,600 delivered units. Construction activities are progressing on schedule, recording an earned value of EGP1.7 billion in 9M2017, a growth of 11% YoY.
Our recurring income portfolio from three hotels and commercial real estate segment contributed 17% 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 2,582 memberships by end of 9M2017.
Outlook
The Company will postpone the monetization of receivables of up to c.EGP700 million to 1H2018 instead of 2H2017, once the interest rate environment improves. PHD is on track to meet the previously announced FY2017 targets in terms of new sales of EGP9.5 billion, construction spend of EGP2.3 billion, and to deliver 1,600 units.
With regards to projects to be launched, the co-development project in Alexandria has been postponed from 4Q2017 to 1Q2018 due to regulatory reasons. As the Oasis project's master plan is nearing completion, the Company expects to launch the first phase of residential units during 1H2018.
Consolidated Income Statement 2
(Egyptian Accounting Standards)
Revenue | 1,529,553 | 1,485,231 | 3% | 4,757,805 | 3,656,251 | 30% |
Cost of Revenue | (999,020) | (968,529) | 3% | (3,282,016) | (2,538,654) | 29% |
Gross Profit | 530,532 | 516,702 | 3% | 1,475,788 | 1,117,596 | 32% |
Gross Profit Margin | 35% | 35% | - | 31% | 31% | - |
General Administrative, Selling and Marketing Expenses | (221,135) | (150,343) | 47% | (537,530) | (418,022) | 29% |
EBITDA | 309,397 | 366,397 | (16%) | 938,258 | 699,575 | 34% |
EBITDA Margin | 20% | 25% | (5pp) | 20% | 19% | 1pp |
Administrative Depreciation | (5,230) | (3,278) | 60% | (15,074) | (8,662) | 74% |
Operating Profit | 304,167 | 363,081 | (16%) | 923,184 | 690,913 | 34% |
Less: | ||||||
Finance Cost & Interests | (82,302) | (16,756) | NA | (157,156)3 | (33,355) | NA |
Securitization of Notes Receivables | (24,715) | - | NA | (116,441)4 | - | NA |
Interest on Land Purchase Liabilities | (56,598) | (31,164) | 82% | (109,724) | (87,480) | 25% |
Provisions | 72 | 650 | (89%) | (4,670) | (1,204) | NA |
Add: | ||||||
Recoverable Interest on Land Purchase Liabilities | - | - | 82,824 | - | NA | |
Interest Income - Amortization of Discount on Notes Receivables | 16,798 | 11,515 | 46% | 50,393 | 34,546 | 46% |
Gain from Held for Trading Investment | 15,102 | 14,523 | 4% | 45,071 | 74,025 | (39%) |
Interest Income | 1,665 | 1,511 | 10% | 4,589 | 4,221 | 9% |
Net Profit Before Income Tax & Minority | 174,189 | 343,360 | (49%) | 718,072 | 681,666 | 5% |
Income Tax Expense | (18,142) | (76,567) | (76%) | (116,234) | (156,685) | (26%) |
Deferred Tax | (261) | (204) | 28% | 798 | (566) | NA |
Net Profit After Tax | 155,785 | 266,589 | (42%) | 602,636 | 524,415 | 15% |
Non-Controlling Interest | (38,129) | (31,613) | 21% | (135,641) | (120,107) | 13% |
Net Profit After Tax & Minority Interest | 117,656 | 234,977 | (50%) | 466,995 | 404,308 | 16% |
Net Profit After Tax & Minority Interest Margin | 8% | 16% | (8pp) | 10% | 11% | (1pp) |
Consolidated Balance Sheet
(Egyptian Accounting Standards)
Long-Term Assets | ||
Investments in Associates | 83,837 | 79,226 |
Investment Property | 887,193 | 888,506 |
Notes Receivable - Long Term | 9,844,674 | 7,300,040 |
Projects Under Construction | 883,052 | 877,767 |
Advance Payments for Investments Acquisitions | 184,336 | 184,336 |
Fixed Assets (net) | 346,571 | 351,608 |
Deferred Tax Asset | 11,072 | 10,302 |
Other Long Term Assets | 1,391 | 1,391 |
Employee stock ownership plan (ESOP) | 75,539 | 81,287 |
Total Long-Term Assets | 12,317,664 | 9,774,462 |
Current Assets | ||
Works in Process | 8,962,210 | 6,410,746 |
Held to Maturity Investments | 310,797 | 153,328 |
Cash & Cash Equivalents | 590,713 | 808,517 |
Notes Receivable - Short Term | 3,759,571 | 3,295,528 |
Investments at Fair Value | 45,356 | 58,471 |
Accounts Receivable | 792,769 | 757,057 |
Suppliers - Advance Payments | 542,350 | 489,064 |
Debtors & Other Debit Balances | 362,478 | 218,477 |
Due from Related Parties | 262,580 | 244,125 |
Guaranteed Payments - Joint Arrangements Partners | 50,000 | 40,000 |
Total Current Assets | 15,678,823 | 12,475,312 |
Total Assets | 27,996,487 | 22,249,774 |
Current Liabilities | ||
Banks - Credit Balances | 103,070 | 42,176 |
Banks - Overdraft | 196,936 | 79,410 |
Advances from Customers | 9,739,910 | 7,744,755 |
Completion of Infrastructure Liabilities | 95,083 | 95,083 |
Provisions | 174,606 | 169,387 |
Current Portion of Land Purchase Liabilities | 144,884 | 60,651 |
Investment Purchase Liabilities | 44,257 | 44,257 |
Notes Payable - Short Term | 1,056,505 | 974,302 |
Current Portion of Term Loans | 803,014 | 541,015 |
Suppliers & Contractors | 444,099 | 448,466 |
Income Tax Payable | 116,464 | 126,629 |
Creditors & Other Credit Balances | 511,082 | 522,256 |
Due to Joint Arrangements Partners | 180,388 | 160,424 |
Due to related Parties | 104,045 | 131,333 |
Total Current Liabilities | 13,714,343 | 11,140,145 |
Working Capital | 1,964,480 | 1,335,168 |
Total Investment | 14,282,144 | 11,109,629 |
Financed as Follows: | ||
Shareholders' Equity | ||
Issued and Paid-In Capital | 4,617,899 | 4,617,899 |
Legal Reserve | 680,728 | 630,142 |
Special Reserve | 524,213 | 524,213 |
ESOP Re-measurement Reserve | 30,160 | 31,493 |
Retained Earnings (Deficit) | 127,280 | (222,479) |
Net Profit for the Period/Year | 466,995 | 639,795 |
Equity Attributable to Equity Holders of Parent Co. | 6,447,276 | 6,221,064 |
Non-Controlling Interest | 541,743 | 412,152 |
Total Shareholders' Equity | 6,989,019 | 6,633,215 |
Long Term Liabilities | ||
Land Purchase Liabilities | 353,834 | 169,800 |
Notes Payable - Long Term | 2,108,893 | 612,701 |
Other Long Term Liabilities - Residents' Association | 1,004,572 | 736,444 |
Loans | 3,214,046 | 2,957,470 |
Due to Joint Arrangements Partners | 611,780 | - |
Total Long Term Liabilities | 7,293,125 | 4,476,414 |
Total Equity & Long Term Liabilities | 14,282,144 | 11,109,629 |
Net Profit for the period (Before Income Tax & Non-Controlling Interest) | 718,072 | 681,666 |
Administrative Depreciation | 27,138 | 19,589 |
Provision Formed | 4,670 | 1,204 |
Securitization of Receivables Interest | 116,441 | - |
Interest on Land Purchase Liabilities | 109,724 | 87,480 |
Finance Costs & Interest | 157,156 | 33,355 |
Gain on Disposal of Property & Equipment | 4 | (37)) |
Share of Profit/Loss of Associates | (4,611) | 1,574 |
Gains on Investments in Fair Value through Profit or Loss | (4,589) | (4,221) |
Interest Income | (45,071) | (74,025) |
Recoverable Interest on Land Purchase liabilities | (82,824) | - |
Interest Income - Amortization of Discount on Notes Receivables | (50,393) | (34,546) |
Operating Profit Before Changes in Working Capital Items | 945,715 | 712,039 |
Changes in Working Capital Items | ||
Change in Work in Process | (2,033,231) | (132,578) |
Change in Notes Receivables | (2,958,283) | (2,019,435) |
Change in Investments in Fair Value through Profit or Loss | 13,116 | 5,497 |
Change in Held-to-maturity Investments | (157,469) | 499,345 |
Change in Accounts Receivable | (35,713) | (103,465) |
Change in Suppliers - Advance Payments | (53,286) | 37,763 |
Change in Debtors & Other Debit Balances | (144,002) | (153,757) |
Change in Due to Related Parties | (18,455) | (61,602) |
Change in Guaranteed Payments - Joint Arrangements | 631,743 | - |
Change in Advances from Customers | 1,995,155 | 926,664 |
Change in Completion of Infrastructure Liabilities | - | (87,565) |
Provisions | 549 | (185) |
Change in Due to Related Parties | (27,289) | (95,979) |
Changes in Notes Payables | 1,551,496 | 531,402 |
Change in Suppliers & Contractors | (4,366) | (20,841) |
Income Tax Paid | (126,399) | (46,612) |
Change in Creditors and Other Credit Balances | (11,174) | 104,896 |
Change in Other Long Term - Residents' Association | 268,128 | 166,897 |
Due to Joint Arrangements Partners | (10,000) | (90,000) |
Net Cash (Used In) Operating Activities | (173,766) | 181,483 |
Cash Flows from Investing Activities | ||
Payments for Purchase of Fixed Assets | (26,725) | (31,096) |
Proceeds from Sale of Fixed Assets | - | 44 |
Proceeds from Payments for Projects Under Construction | (5,285) | (87,651) |
Proceeds from Investments in Fair Value through Profit or Loss | 4,589 | 4,221 |
Interest Received on Held to Maturity Investments | 45,071 | 74,025 |
Cash Flows from Investing Activities | 17,650 | (40,458) |
Cash Flows from Financing Activities | ||
Banks - Credit Balances | 60,894 | 706 |
Banks - Overdraft | 117,526 | 8,008 |
Dividends | - | (368,630) |
Adjustments to Retained Earnings | (239,450) | (271,591) |
Proceeds from ESOP | 4,415 | - |
Non-Controlling Interest - Dividends | (6,048) | (4,085) |
Deferred Tax | 28 | 43 |
Proceeds from Loans | 568,903 | 583,134 |
Repayment of Loans | (294,358) | (92,627) |
Securitization of Receivables Interest | (116,441) | - |
Finance Costs & Interests | (157,156) | (33,351) |
Net Cash Provided by Financing Activities | (61,688) | (178,396) |
Net Increase in Cash & Cash Equivalents during the Period | (217,804) | (37,372) |
Cash & Cash Equivalents at Beginning of the Period | 808,516 | 965,669 |
Cash & Cash Equivalents as at 30 September 2017 | 590,713 | 928,298 |
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 41.1 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 3Q2017, PHD delivered more than 7,691 units within its developments, including more than 3,410 units in 12 completed projects. Today, PHD has 11 projects under development, 5 projects in West Cairo, 4 projects in East Cairo and 2 projects in the North Coast, in addition to 5 new projects including 4 co-developments, translating into a sales backlog exceeding EGP11.5 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, Extensions 1504
Investor.relations@phdint.com