PHDC.L Regulatory News (PHDC)

PHD achieve New Sales of EGP8.1 billion in 9M2019, supported by the best September sales ever in the Company's history, on track to exceed the full year target of EGP14 billion, maintaining a positive Cash Flow from Operations

Cairo/London (November 17, 2019) - 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, 2019.

Key Highlights

·; New Sales (Residential and Commercial) amounted to EGP8.1 billion in 9M2019, translating into 1,797 units. Palm Hills Alexandria accounted for c.55% of 9M2019 New Sales or EGP4.5 billion (711 Units). While Palm Hills New Cairo recorded New Sales of EGP609 million in 9M2019. New Sales was 18% lower YoY when compared with 9M2018, as the latter witnessed the launch of Badya's Phase 1A and the sale of PK2 Mall. In 9M2019, Commercial New Sales reached EGP458 million, largely driven by the sale of office space in Golf Central for EGP279 million. While the Lane Mall and Hale Town contributed EGP77 million and EGP66 million respectively. New Sales grew 2% YoY in 3Q2019, to reach EGP2.1 billion, supported by the best September sales ever in the Company's history, which followed the "Ready to Move" campaign.

·; In October 2019, the Company concluded a securitization transaction for a gross receivables portfolio of EGP776 million, as part of the Company's plans to optimize leverage via monetization of receivables associated with handed over residential units. Said receivables portfolio included 582 delivered units. The Company paid EGP484 million to local banks (principle and interest) out of the EGP601 million net proceeds.

·; Revenue amounted to EGP3.6 billion in 9M2019, a decrease of 36% YoY, mostly due to lower handed over residential units YoY as most projects currently under development are nearing completion, noting that PHD had c.658 units released from construction by end of 3Q2019, some of which are in non-livable zones with ongoing site development or not yet received by the respective home owner. While Revenue for the quarter stood at EGP1.1 billion. PHD maintained a healthy Gross Profit margin of 40% in 9M2019 compared to 38% in 9M2018, mainly driven by the YoY growth in the value of units delivered as well as land sales related to standalone units sold.

·; Net Profit after Tax and Minority Interest amounted to EGP544 million in 9M2019, a decrease of 15% YoY, implying a Net Profit margin of 15%, a growth of 4pp YoY.

·; The Company achieved positive Cash Flows from Operations of EGP573 million in 9M2019, on track to maintain a positive balance moving forward.

·; The Company spent EGP1.5 billion on construction activities during 9M2019, mainly on Palm Hills New Cairo, Hacienda Bay, Golf Extension, Capital Gardens, Golf Views, Palm Valley, Woodville and The Crown.

·; PHD continued its efforts with regards to expediting projects' deliveries with a number of phases completed in projects currently under development including the completion of Palm Valley and Hacienda Bay, c.95% of Golf Extension and completed phase 9 in PK2 extension. The Company commenced construction in Badya and The Crown.

·; On the commercial front, some of the tenants in Palm Central concluded the interior finishing and started to move in already.

·; PHD handed over 680 residential and commercial units during 9M2019 with most of the handed overs units in the following projects: Woodville, Golf Extension, Golf Views, Palm Parks, Hacienda Bay, and Hacienda White 2. The Company delivered 98 units in Palm Valley in West Cairo ahead of schedule starting 2Q2019. PHD is planning to deliver c.200 units in Capital Gardens during 4Q2019, a couple of quarters ahead of planned handover schedule.

Yasseen Mansour, Chairman & Group CEO Comments:

I am pleased to share with you our 9M2019 financial and operational results. We continued our steady focus on generating positive Cash Flows from Operations, which resulted in EGP573 million during 9M2019, in line with our target as announced by the beginning of the year, which is further solidifying our financial position.

New Sales stood at EGP8.1 billion during 9M2019, mostly on the back of strong uptake in Palm Hills Alexandria and Palm Hills New Cairo, translating into 1,797 sold units. New Sales during 3Q2019 grew 2% YoY to EGP2.1 billion, supported by the launch of the "Ready to Move" campaign which took place during September for units that are available for immediate delivery once the client sign the contract, with various payment schemes. Said campaign generated New Sales of c.EGP0.5 billion.

We are still eyeing further improvement towards year end from our efficiency program, which we adopted by the beginning of 2019 and led to a decrease of 12% YoY in SG&A Expenses, along with expectations for further interest rates cut by the MPC, noting that the 450 bps interest rate cuts which took place during 2019 yields total saving of c.EGP300 million per annum in Interests, Financing Cost and Land Liabilities.

There is a negative correlation between interest rates and real estate sales, which will not only lead to a reduction in PHD's costs but will also result in higher demand for our product offerings, which was evidenced by the stellar sales performance during September 2019, although our Company did not launch any new projects.

Looking at our Net Debt position, it amounted to EGP2.7 billion by end of 9M2019, with Receivables of EGP17.8 billion, where Receivables cover Net Debt 6.6 times. Net Debt/EBITDA stood at 2.4 times by end of 9M2019.

We have successfully completed a securitization of receivables transaction during October 2019 for a gross receivables portfolio of EGP776 million, and spent most of the net proceeds on prepaying some of the existing bank debt and related interest charges. We are planning to engage in further securitization and discounting transactions with a gross receivables portfolio of up to c.EGP1.5 billion during 1H2020, as the interest rate environment improve further complemented by conclusion of projects currently under developments.

With existing debt balance being settled gradually, we are in discussions with a number of local and foreign lending institutions regarding the long term financing of Badya in the range of c.EGP1.5-2 billion, whereby we plan to maintain our current net debt position and leverage ratio.

We see some improvements in the property market conditions and appetite for first homes with the easing inflationary environment, evidenced by the strong uptake of our residential offerings on the back of some recent marketing campaigns launched during 4Q2019, allowing us to confidently exceed the full year sales target of EGP14 billion.

Financial Review

In 9M2019, Revenue amounted to EGP3.6 billion, a decrease of 36% YoY, due to lower handed over residential units YoY, noting that PHD had c.658 units released from construction, some of which are in non-livable zones with ongoing site development or not yet collected by the respective home owner. Palm Hills Alexandria contributed largely to Revenue and Gross Profit. Gross Profit stood at EGP1.4 billion, translating into a Gross Profit margin of 40%, mostly due to the handover of high margin units.

EBITDA stood at EGP826 million, an EBITDA margin of 23%. Net Profit after Tax and Minority Interest amounted to EGP544 million, a Net Profit margin of 15%.

Net Debt amounted to EGP2.7 billion by end of 9M2019, with Receivables of EGP17.8 billion solidifying our Balance Sheet where Receivables cover Net Debt 6.6 times. Net Debt/EBITDA stood at 2.4 times by end of 9M2019.

Operational Review

New Sales amounted to EGP8.1 billion in 9M2019, of which EGP7.6 billion was generated from residential sales and EGP458 million from the commercial segment. Palm Hills Alexandria was the largest contributor to Residential New Sales, followed by Palm Hills New Cairo, The Crown and Badya.

Commercial sales were lower YoY since 9M2018 had seen a one-off transaction related to the sale of PK2 Mall for EGP720 million. Golf Central seen major uptake following its successful launch in May 2019 with New Sales of EGP279 million. While the Lane Mall and Hale Town contributed EGP77 million and EGP66 million respectively.

In West Cairo, New Sales amounted to EGP2.3 billion, of which EGP1.8 billion were generated from the sale of residential units across all the projects, with the balance generated by the commercial segment. Commercial sales were driven by the recently launched business complex Golf Central, generating EGP279 million.

In East Cairo, New Sales stood at EGP722 million in 9M2019, mainly driven by Palm Hills New Cairo, bringing the project's cumulative New Sales to EGP8.4 billion.

North Coast and Alexandria recorded New Sales of EGP5.1 billion during 9M2019, fueled by demand for Palm Hills Alexandria followed by Hacienda Bay project.

The Company handed over 680 residential and commercial units during 9M2019 with most of handed overs units in the following projects: Woodville, Palm Valley, Golf Extension, and Hacienda Bay. Noteworthy, the company aims to deliver c.200 units in Capital Gardens, a couple of quarters ahead of planned delivery schedule.

Number of memberships in Palm Hills Club stood at 3,366 memberships by end of 9M2019.

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 41.6 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 9M2019, PHD delivered 10,297 units within its developments, including more than 6,912 units in 15 completed projects. Today, PHD has 8 projects under development, 3 projects in West Cairo, 3 projects in East Cairo and 2 projects in the North Coast, in addition to 7 new projects including 6 co-developments, translating into a sales backlog of c.EGP15.5 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/

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.