PHDC.L Regulatory News (PHDC)

Cairo/London (November 22, 2018) - Palm Hills Developments S.A.E. ("PHD" or "the Company") (EGX: PHDC.CA, PHDC.LI), a leading real estate developer in Egypt, announced its consolidated financial and operating results for the financial period ended September 30, 2018.

Key Highlights

§ PHD achieved record New Sales of EGP4.5 billion in Badya, potentially its largest integrated development spreading 12.6 million sqm in West Cairo, translating to 1,787 residential units since the project was launched in May 2018.

§ As part of the Company's strategy to focus on profitable growth, margins continued to improve across the board during 9M2018. Gross Profit margin reached 38% (+7pp YoY) in 9M2018 and 37% (+2pp YoY) in 3Q2018, coupled with 54% YoY growth in EBITDA recording EGP1.4 billion, an EBITDA margin of 26% (+6pp YoY). Net Profit after Tax & Minority Interest margin reached 11% (+1.5pp).

§ In October 2018, the Company concluded a discounting transaction of EGP316 million receivables portfolio relating to 181 delivered units in Golf Views, Golf Extension, Palm Hills Katmya Extension and Hacienda White 2. PHD received net proceeds of EGP223 million, after applying a discount rate of 18.75%, and deducting various transaction related fees and commissions. The Company utilized the proceeds in paying part of its existing debt, in line with its deleveraging plans. Notably, PHD remains on track to conclude a number of securitization and discounting of receivables transactions prior to year-end for portfolio up to EGP1.0 billion.

§ The first round of subscription in the EGP1.54 billion Rights Issue was concluded on November 15, 2018 with 80.7% subscription ratio, translating into net proceeds of EGP1.24 billion excluding issuance fees of EGP18.6 million. The Company expects to launch a second round of subscription for the unsubscribed portion after securing the required regulatory approvals.

9M2018 Highlights

§ New Sales (Residential and Commercial) amounted to EGP9.8 billion, a growth of 21% YoY. Said growth was largely driven by strong uptake of launched units in Badya, demand for residential units in Palm Hills New Cairo, and the remarkable 183% YoY growth in commercial sales which reached EGP1.4 billion.

§ Cash Inflows from Operations reached EGP3.8 billion, translating into 8% YoY growth. Construction earned value amounted to EGP1.2 billion.

§ Revenue grew by 19% YoY to reach EGP5.7 billion. Said growth resulted from an increase in handover of residential units in Palm Parks, Golf Extension, Hacienda Bay, and Hacienda White 2, complemented by 21% YoY increase in New Sales including a higher number of standalone units in Palm Hills New Cairo, Badya and Golf Extension. Gross Profit and EBITDA margins stood at 38% and 26% respectively.

§ Net Profit after Tax and Minority Interest grew 37% YoY to reach EGP640 million, translating into a Net Profit margin of 11%, mostly due to trickledown effect in profitability margins resulting from the delivery of high margin units, despite the negative impact associated with the one-time charges relating to securitization and discounting of receivables by EGP114 million.

§ The Company handed over 1,101 units mainly in Palm Parks, Golf Views, Golf Extension, Hacienda Bay, and Hacienda White 2.

3Q2018 Highlights

§ Revenue grew 49% YoY to record EGP2.3 billion driven by growth in sales and handovers. Gross Profit amounted to EGP836 million, a margin of 37%. EBITDA witnessed strong growth of 76% YoY to reach EGP544 million, translating into an EBITDA margin of 24%.

§ Net Profit after Tax & Minority Interest stood at EGP200 million. Notably, earnings for the quarter were negatively impacted by a one-time financial charge of EGP29 million relating to the discounting of receivables transaction concluded in October 2018.

Yasseen Mansour, Chairman & Group CEO Comments:

I am pleased to share with you our third quarter 2018 financial results, another strong quarter for the Company in terms of New Sales, profitable growth, handovers, a period during which we have seen continued demand for our mini-city Badya coupled with a healthy uptake in commercial sales.

New Sales grew 21% YoY to record EGP9.8 billion during 9M2018, on the back of strong uptake in Badya, where we sold 1,787 worth EGP4.5 billion. New Sales during 9M2018 were supported by the continued demand for residential offerings in Palm Hills New Cairo and Capital Gardens, recording EGP1.6 billion and EGP506 million respectively. Growth in demand for our commercial proposition reflected strongly in New Sales, as we sold 103 units worth EGP1.4 billion during 9M2018.

Contribution from our recurring income portfolio stood at 8% of Net Profit, driven by the continued recovery in tourism coupled with steady growth in Palm Club's operations.

We are still gaining market share with 2,661 units sold during 9M2018, a growth 56% YoY in the number of units sold compared to 1,709 units during 9M2017. We continue to lead the market in terms of the number of delivered units with 1,101 homes handed over during the period. We spent EGP1.2 billion on construction and generated cash inflows from operations of EGP3.8 billion.

Our financial results continued to improve, reflecting our focus on profitable growth and margins expansion with Revenue of EGP5.6 billion, Gross Profit margin of 38%, EBITDA margin of 26%, Net Profit after Tax & Minority Interest of EGP640 million and Net Profit margin of 11%. Our Balance Sheet maintained its strong position with receivables recording EGP18.2 billion, covering Net Debt 5.6 times.

Given our commitment to deleverage the Balance Sheet, we concluded a discounting of receivables transaction in 3Q2018 with net proceeds of EGP223 million, which we utilized in paying part of existing debt. We are currently engaged in further securitization and discounting transactions of receivables portfolio worth c.EGP1.0 billion and expect to conclude these transactions prior to year-end.

With regards to the EGP1.54 billion capital increase, we successfully concluded the first round of subscription with 80.7% coverage translating into EGP1.24 billion of net proceeds, which is a strong evidence of the sustained trust and commitment from our shareholders and the strong interest from new investors. We expect to launch a second round of subscription for the remaining 19.3% after securing the regulatory approvals. The new shares are expected to be issued and listed on the Egyptian Stock Exchange and the London Stock Exchange during December 2018.

Financial Review

Revenue reached EGP5.6 billion in 9M2018, a growth of 19% YoY. Revenue growth resulted from an increase in handover of residential units in Palm Parks, Golf Extension, Hacienda Bay, and Hacienda White 2, complemented by 21% YoY increase in New Sales including a higher number of standalone units in Palm Hills New Cairo, Badya and Golf Extension.

Improvements in profitability margins continued during the period. Gross Profit increased by a remarkable 46% YoY to record EGP2.1 billion, a margin of 38% with an increase of 7pp YoY. The improvement in margins was partially driven by the delivery of high margin residential units. EBITDA also grew 54% YoY to EGP1.4 billion, translating into an EBITDA margin of 26%. Net Profit after Tax and Minority Interest grew 37% YoY reaching EGP640 million, implying a Net Profit margin of 11%, mostly due to trickledown effect in profitability margins, despite the negative impact associated with the one-time charges relating to securitization and discounting of receivables, which amounted to EGP114 million in 9M2018.

Revenue for the quarter grew 49% YoY to record EGP2.3 billion, largely due to the handover of higher value units coupled with New Sales growth. Gross Profit increased 58% YoY reaching EGP836 million, a margin of 37%. EBITDA witnessed strong growth of 76% YoY to reach EGP544 million, translating into an EBITDA margin of 24%. Net Profit after Tax & Minority Interest stood at EGP200 million, an increase of 70% YoY. Notably, earnings for the quarter were negatively impacted by one-time financial charges of EGP29 million relating to the discounting of receivables transaction which was concluded during October 2018.

Net Debt/EBITDA stood at 1.7x, decreasing from 2.7x in 9M2017. By end of 9M2018, Receivables recorded EGP18.2 billion, up from EGP14.4 billion in 9M2017, covering Net Debt by 5.6 times.

Operational Review

Strong Sales growth driven by demand for residential and commercial offerings

In 9M2018, New Sales amounted to EGP9.8 billion, a growth of 21% YoY, of which EGP8.4 billion were generated by residential sales and EGP1.4 billion from the sale of commercial units. Notably, Badya was the largest contributor to New Sales (53% of Residential New Sales), followed by Palm Hills New Cairo (c.19% of Residential New Sales).

With regards to commercial sales, the segment achieved remarkable growth of 183% YoY recording EGP1.4 billion. Said growth was driven by the sale of PK2 Mall in East Cairo, retail outlets in Hacienda Bay's Lake yard following its successful launch during the summer season, commercial units in VGK and The Lane Malls, as well as clinics in Hale Town (previously known as Palm Hills Medical Clinics).

The number of units sold (residential and commercial) during 9M2018 increased 56% YoY to record 2,661 units (including 1,787 units in Badya). Average selling prices for 9M2018 increased by 15% YoY for BUA of apartments, 21% YoY for BUA of standalone units and 16% YoY for land of standalone units.

In 3Q2018, New Sales stood at EGP2 billion, a growth of 5% YoY. Residential sales softened 13% YoY amounting to EGP1.7 billion, while commercial sales accounted for the balance achieving strong growth supported by the sale of commercial units in the North Coast. The following chart shows percentage contribution of each operating region to New Sales during 9M2018:

In West Cairo, New Sales recorded EGP6.1 billion, of which residential sales contributed EGP5.7 billion mostly in Badya (EGP4.5 billion since its launch in May 2018) coupled with demand for commercial units offered in The Lane and Hale Town, where New Sales amounted to EGP325 million and EGP68 million respectively.

In East Cairo, New Sales decreased 19% YoY and amounted to EGP3.1 billion in 9M2018, due to the comparison with a high base in the previous period which seen strong uptake in Palm Hills New Cairo. The Company sold commercial units worth EGP860 million in VGK and PK2 Malls.

In the North Coast, New Sales stood at EGP648 million during 9M2018, down from EGP1.9 billion a year earlier, mainly due to fewer launched inventory in the region. On the commercial front, New Sales recorded EGP217 million in 3Q2018, following the launch of one of the trendiest F&B and retail outlets on the Mediterranean Sea, Lakeyard at Hacienda Bay.

The Company handed over 1,101 units during the 9M2018, on schedule to deliver 1,500 units by the end of 2018. Construction activities recorded an earned value of EGP1.2 billion during 9M2018.

Recurring income portfolio from three hotels and commercial real estate segment contributed 8% of Net Profits. The number of memberships in Palm Club stood at 3,024 memberships by end of 9M2018.

Outlook

The Company expects to launch the second phase of residential units in Badya prior to year-end. Furthermore, the Company is currently working on the development plans of the co-development project in Alexandria, which is scheduled for launch during 1Q2019.

PHD received the letter of award relating to the 205 feddan mixed use plot in West Cairo, and expect to reach a definitive agreement within the next 3-6 month.

The Company expects to monetize receivables of up to c.EGP1.0 billion prior to year-end, in line with the planned securitization and discounting of receivables program, with the aim of deleveraging the Balance Sheet in the medium term.

With regards to FY2018 financial targets, the Company's management expect to meet all its previously announced targets namely New Sales of EGP12 billion, Net Profit above EGP800 million and to deliver 1,500 units.

Income Statments

In EGP 000's

3Q2018

3Q2017

%

9M2018

9M2017

%

Revenue

2,282,521

1,529,553

49%

5,656,015

4,757,805

19%

Cost of Revenue

(1,446,757)

(999,020)

45%

(3,508,530)

(3,282,016)

7%

Gross Profit

835,764

530,532

58%

2,147,485

1,475,788

46%

Gross Profit Margin

37%

35%

6pp

38%

31%

7pp

General Administrative, Selling and Marketing Expenses

(291,874)

(221,135)

32%

(701,852)

(537,530)

31%

EBITDA

543,891

309,397

76%

1,445,659

938,258

54%

EBITDA Margin

24%

20%

4pp

26%

20%

6pp

Administrative Depreciation

(15,409)

(5,230)

NA

(46,112)

(15,074)

NA

Operating Profit

528,482

304,167

74%

1,399,547

923,184

52%

Less:

Finance Cost & Interests

(100,921)

(82,302)

23%

(207,735)3

(157,156)

32%

Securitization of Notes Receivables

(28,644)

(24,715)

16%

(114,003)

(116,441)4

(2%)

Interest on Land Purchase Liabilities

(72,196)

(56,598)

NA

(190,442)

(109,724)

NA

Provisions

(3,020)

72

NA

(12,189)

(4,670)

NA

Add:

Recoverable Interest on Land Purchase Liabilities

-

-

NA

-

82,824

-

Interest Income - Amortization of Discount on Notes Receivables

20,131

16,798

20%

60,394

50,393

20%

Interest Income on Held to Maturity Investments

13,433

15,102

(11%)

45,746

45,071

1%

Gain from Held for Trading Investment

2,187

1,665

31%

6,143

4,589

34%

Net Profit Before Income Tax & Minority

359,452

174,189

106%

987,461

718,072

38%

Income Tax Expense

(123,576)

(18,142)

NA

(275,855)

(116,234)

NA

Deferred Tax

(184)

(261)

(30%)

(453)

798

(157%)

Net Profit After Tax

235,692

155,785

51%

711,152

602,636

18%

Non-Controlling Interest

(35,374)

(38,129)

(7%)

(70,953)

(135,641)

(48%)

Net Profit After Tax & Minority Interest

200,318

117,656

70%

640,219

466,995

37%

Net Profit After Tax & Minority Interest Margin

9%

8%

1pp

11%

10%

1pp

Consolidated Balance Sheet

In EGP 000

September 30, 2018

December 31, 2017

Long-Term Assets

Investments in Associates

91,311

83,615

Investment Property

763,928

758,690

Notes Receivable - Long Term

13,182,510

11,356,555

Projects Under Construction

99,896

882,473

Advance Payments for Investments Acquisitions

193,496

184,336

Fixed Assets (net)

1,444,242

347,278

Deferred Tax Asset

4,890

5,485

Other Long-Term Assets

1,391

1,391

Employee stock ownership plan (ESOP)

-

83,414

Total Long-Term Assets

15,781,663

13,703,236

Current Assets

Works in Process

8,756,727

9,193,761

Held to Maturity Investments

727,396

467,935

Cash & Cash Equivalents

655,433

562,030

Notes Receivable - Short Term

3,841,301

3,012,453

Investments at Fair Value

66,041

51,427

Accounts Receivable

1,161,558

883,344

Suppliers - Advance Payments

449,631

486,084

Debtors & Other Debit Balances

1,215,816

589,211

Due from Related Parties

307,552

251,408

Guaranteed Payments - Joint Arrangements Partners

-

50,000

Total Current Assets

17,181,457

15,547,652

Total Assets

32,963,120

29,250,888

Current Liabilities

Banks - Credit Balances

55,506

50,561

Banks - Overdraft

846,412

374,696

Advances from Customers

11,713,389

10,132,168

Completion of Infrastructure Liabilities

95,083

95,083

Provisions

252,432

240,244

Current Portion of Land Purchase Liabilities

198,387

102,493

Notes Payable - Short Term

1,496,924

1,239,625

Current Portion of Term Loans

1,206,237

979,574

Suppliers & Contractors

500,641

543,392

Income Tax Payable

340,487

162,100

Creditors & Other Credit Balances

606,569

523,428

Due to Joint Arrangements Partners

621,159

174,562

Due to related Parties

172,446

96,617

Total Current Liabilities

18,105,674

14,714,542

Working Capital

(924,218)

833,110

Total Investment

14,857,446

14,536,345

Financed as Follows:

Shareholders' Equity

Issued and Paid-In Capital

4,617,899

4,617,899

Legal Reserve

708,524

682,810

Special Reserve

476,064

476,064

ESOP Re-measurement Reserve

-

43,010

Retained Earnings (Deficit)

515,188

76,127

Net Profit for the Period/Year

640,219

805,638

Equity Attributable to Equity Holders of Parent Co.

6,957,894

6,701,549

Non-Controlling Interest

524,067

538,436

Total Shareholders' Equity

7,481,962

7,239,985

Long Term Liabilities

Land Purchase Liabilities

258,874

335,844

Notes Payable - Long Term

1,922,835

1,912,929

Other Long-Term Liabilities - Residents' Association

1,521,949

1,083,208

Loans

2,558,678

3,228,805

Due to Joint Arrangements Partners

1,113,146

735,573

Total Long-Term Liabilities

7,375,483

7,296,360

Total Equity & Long-Term Liabilities

14,857,445

14,536,345

About Palm Hills Developments

Palm Hills Developments ("PHD"), a leading real estate developer in Egypt, is a joint stock company established in 1997. The Company builds integrated communities and has one of the most diversified land bank portfolios, spreading over 40.6 million square meters ("sqm") in Egypt, including 5 million sqm in Saudi Arabia. PHD'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 9M2018, PHD delivered more than 9,233 units within its developments, including more than 4,933 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 EGP14 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

Disclaimer

This presentation contains statements that could be construed as forward looking. These statements appear in several 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.