27 Feb 2019 08:03
PHD beat market consensus on all matrices recording a growth of 45% YoY in number of units sold to mark 3,102 units, 18% YoY growth in New Sales to EGP12.5 billion and 45%
YoY reduction in Net Debt to EGP1.9 billion
Cairo/London (February 27, 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 December 31, 2018.
Key Highlights
§ In Badya, the Company achieved New Sales of EGP4.8 billion (1,935 residential units) since its launch in May 2018.
§ New Sales (Residential and Commercial) amounted to EGP12.5 billion, a growth of 18% YoY with 3,102 units sold, compared to 2,136 units during FY2017. Growth in New Sales was led by the successful launch of Badya, continued uptake of residential units in Palm Hills New Cairo, complemented by the remarkable 168% YoY growth in commercial sales to EGP1.8 billion. During the year, the Company sold PK2 Mall, clinics in Hale Town, and retail space in Hacienda Bay's Lake Yard, Golf Extension, VGK Mall, and The Lane Mall.
§ PHD concluded securitization and discounting of receivables portfolio of EGP942 million in relation to 663 handed over units during FY2018, with proceeds mostly directed towards deleveraging the Balance Sheet.
§ In 1Q2019, the Company expects to finalize discounting and securitization (non-recourse) transactions of receivables portfolio of c.EGP1.0 billion, in relation to 861 delivered units in the following projects: Palm Parks, Palm Valley, Golf Views, Golf Extension, Palm Hills Katameya (1 & 2), Hacienda Bay and Hacienda White 2. The transactions' proceeds will be utilized entirely in the partial repayment of existing debt.
§ The Company successfully concluded its recent EGP1.54 billion Rights Issue, with 3.3 times oversubscription during the second subscription round. The newly issued shares commenced trading on the EGX & LSE on December 30, 2018.
§ Revenue grew by 12% YoY reaching EGP7.4 billion, surpassing the previously announced target of EGP6.8 billion. Revenue growth resulted from an increase in handover of residential units in Palm Parks, Golf Extension, Hacienda Bay, Hacienda White 2 and Palm Valley, complemented by 19% YoY increase in New Sales including a higher number of standalone units in Palm Hills New Cairo, Badya and Golf Extension.
§ As part of the Company's strategic focus on profitable growth, margins continued to improve across the board during FY2018. Gross Profit increased 23% YoY to EGP2.6 billion, coupled with 21% YoY growth in EBITDA recording EGP1.6 billion, an EBITDA margin of 22%.
§ Net Profit after Tax and Minority Interest stood at EGP812 million, translating into a Net Profit margin of 11%. Net Profit was negatively impacted by one-time charges relating to securitization and discounting of receivables by EGP114 million, interest charges on land liabilities of EGP249 million and an increase in Income Tax Expenses post the expiry of a subsidiary's tax break.
§ The Company handed over 1,541 units, surpassing its previously announced target of 1,500 units in FY2018. The majority of handed overs units were in Palm Parks, Golf Views, Golf Extension, Hacienda Bay, and Hacienda White 2. Notably, PHD started delivering units in Palm Valley and The Lane Mall in West Cairo.
Yasseen Mansour, Chairman & Group CEO Comments:
I am pleased to share with you our full year 2018 financial results. We have made further progress this year on our strategic ambition of enhancing our financial performance with growth in sales, handovers, and profitability margins, led by successful launches and monetization of commercial offerings.
New Sales grew 18% YoY to mark EGP12.5 billion following the successful launch of Badya, where we sold 1,935 units worth EGP4.8 billion. This strong sales figure does not include the bulk of Palm Hills Alexandria, where its results will reflect during FY2019.
We continued to gain market share with 3,102 units sold during FY2018. PHD continued to lead the market with 1,541 units handed over to clients, as we spent EGP1.5 billion on construction.
Our P&L continued to improve during FY2018, reflecting our focus on profitable growth and margins expansion with Revenue of EGP7.4 billion, Gross Profit margin of 35%, EBITDA margin of 22%, Net Profit after Tax & Minority Interest of EGP812 million.
The recurring income portfolio contributed 10% to Net Profit in FY2018, following the swift recovery of tourism coupled with steady growth in Palm Club's operations. We are targeting to expand the portfolio's contribution over the next few years with aims to reach 20% by 2022.
We listened to the investor community's concerns regarding leverage. Although we were comfortable with our Net Debt position, we reduced Net Debt by 45% YoY to EGP1.9 billion by end of FY2018, down from EGP3.6 billion a year earlier, further solidifying our Balance Sheet where receivables cover Net Debt 9.4 times. Net Debt/EBITDA stood at 1.2x in FY2018, compared to 2.6x in FY2017. Our commitment to deleverage the Balance Sheet continues in FY2019.
Regarding Botanica, we were pleased with the reallocation and rezoning of some state-owned land on Cairo Alexandria highway to the New Urban Communities Authority ("NUCA") in accordance with the recent presidential decrees, which will positively impact Botanica's allowable built up area and valuation as part of the New Sphinx City, given Botanica's proximity to Sphinx International Airport. Looking at the North Coast, we are pleased with the approval of the region's strategic master plan, which will positively affect Hacienda West. We are still negotiating the co-development agreement of the mixed-use plot spreading 205 feddan in West Cairo and hope to reach a definitive agreement during 1H2019.
Looking ahead, we are eyeing New Sales of EGP14 billion in FY2019, to deliver 1,350 units, spend EGP2.2 billion on construction, recognize Revenue of EGP7.5 billion, achieve a Gross Profit margin above 38%, which should lead to a Net Profit of more than EGP1 billion.
Revenue for FY2018 grew by 12%YoY to EGP7.4 billion, driven by New Sales of standalone units in Palm Hills New Cairo, Badya and The Crown, complemented by the handover of 1,541 units (1,511 residential and 30 commercial units). A large percentage of handovers were in Palm Parks, Hacienda Bay, Hacienda White 2, Golf Extension and Woodville. Notably, the Company commenced handovers in Palm Valley, The Lane Mall and Palm Central ahead of schedule.
While Gross Profit increased by 23% YoY to record EGP2.6 billion, a margin of 35%, higher 3pps YoY. Profitability margins continued to improve with support from sold standalone units and the handover of high margin residential units. EBITDA grew 21% YoY to EGP1.6 billion, an EBITDA margin of 22%. Net Profit after Tax and Minority Interest stood at EGP812 million, at par with last year. Notably, Net Profit of FY2018 was negatively impacted by interest charges on land liabilities (EGP249 million) coupled with one off charges relating to securitization and discounting of receivables (EGP114 million), as well as an increase in Income Tax Expenses post the expiry of a subsidiary's tax break.
Looking into 4Q2018, Revenue decreased 4% YoY to EGP1.8 billion due to the difference in sales mix with lower number of standalone units sold during 4Q2018, coupled with the delivery of units in some of the projects currently under development. During 4Q2018, the Company managed to speed up construction works in Palm Valley, The Lane Mall and Palm Central resulting in the handover of 56 residential and commercial units ahead of schedule. Gross Profit and EBITDA amounted to EGP466 million and EGP183 million, a margin of 26% and 10%, respectively. Net Profit after Tax & Minority Interest stood at EGP172 million, a margin of 10%.
Net Debt/EBITDA stood at 1.2x in FY2018, down from 2.6x in FY2017. By end of 2018, Receivables recorded EGP18.4 billion, compared to EGP15.3 billion in 2017, covering Net Debt by 9.4 times.
Operational Review
18% YoY growth in New Sales driven by demand for residential and commercial offerings
New Sales recorded EGP12.5 billion in FY2018, a growth of 18% YoY, of which EGP10.7 billion were generated by residential sales and EGP1.8 billion from commercial sales. Badya was the largest contributor accounting for 45% of Residential New Sales, followed by Palm Hills New Cairo (17% of Residential New Sales) and Palm Hills Alexandria (8% of Residential New Sales).
During the year, commercial sales witnessed an unprecedented growth of 168% YoY to record EGP1.8 billion, driven by the sale of PK2 Mall in East Cairo, retail outlets in Hacienda Bay's Lake Yard, in addition to units in VGK and The Lane Malls, as well as sales of retail space in Golf Extension and clinics (Hale Town) in Golf Views.
Total number of units sold (residential and commercial) increased 45% YoY to 3,102 units (2,136 units in FY2017), comprising 2,977 residential and 125 commercial units.
In 4Q2018, New Sales grew 9% YoY to EGP2.6 billion. Residential sales increased 3% YoY to EGP2.3 billion, while commercial sales witnessed a remarkable 95% growth YoY reaching EGP303 million, mostly due to the sale of retail space in Golf Extension and clinics in Hale Town. The following chart shows percentage contribution of each operating region to New Sales during FY2018:
In West Cairo, New Sales amounted to EGP7.4 billion, (including residential sales by EGP6.7 billion). More than 70% of the region's New Sales were generated by Badya (EGP4.8 billion since its launch in May 2018), followed by The Crown (EGP720 million). Commercial sales recorded EGP683 million, a growth of 17%.
In East Cairo, New Sales decreased 36% YoY to EGP3.4 billion in FY2018, due to the comparison with a high base in the previous period, which seen strong uptake in Palm Hills New Cairo. During FY2018, the Company sold residential and commercial units worth EGP2.5 billion and EGP863 million respectively in East Cairo.
In the North Coast and Alexandria, New Sales stood at EGP1.6 billion during FY2018, mostly due to the launch of Palm Hills Alexandria during December 2018, where the Company achieved EGP863 million (111 units). On the commercial front, New Sales recorded EGP225 million in FY2018, following the launch of Lake Yard at Hacienda Bay.
The Company handed over 1,541 units, surpassing its previously announced target of 1,500 units in FY2018. The bulk of handovers were in the following projects: Palm Parks, Golf Views, Golf Extension, Hacienda Bay, and Hacienda White 2. PHD started delivering units in Palm Valley (30 units) and The Lane Mall (19 retail outlets). Construction activities recorded an earned value of EGP1.5 billion during FY2018.
Recurring income portfolio from our three hotels and commercial real estate segment contributed 10% to Net Profit. The number of memberships in Palm Club stood at 3,150 memberships by end of FY2018.
Outlook
PHD expects to spend EGP2.2 billion on construction during FY2019 with further acceleration in the pace of handovers and deliveries target of 1,350 units. The Company expects to complete few projects during the year including Palm Valley, Golf Extension and Woodville in West Cairo, as well as Palm Hills Katameya extension 2 in East Cairo.
The Company is eyeing New Sales of EGP14 billion, capitalizing on Badya, Palm Hills Alexandria, Palm Hills New Cairo and further value unlocking from commercial assets.
PHD intends to engage in further securitization and discounting transactions in FY2019 as the interest rate environment improves further.
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 2018, PHD delivered more than 9,643 units within its developments, including more than 4,968 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 of EGP14.8 billion (Residential segment by EGP13.8 billion and commercial segment by EGP1 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, Extension 1504
Investor.relations@phdint.com DisclaimerThis 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.