26 Feb 2018 08:11
Strong set of results: PHD beat market consensus on all matrices with 24% YoY growth in New Sales to EGP10.5 billion, and 26% YoY growth in Net Profit after Tax & Minority Interest to EGP806 million
Cairo/London (February 26, 2018) - 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 December 31, 2017.
Key Highlights
2017 Highlights
· PHD beat all its previously announced guidance and financial targets for the year on all fronts, and exceeded market consensus and analysts' estimates.
· The Company witnessed improvements in profitability margins across the board namely in Gross Profit and EBITDA margins of 32% and 20% respectively, and Net Profit margin of 12%.
· New Sales amounted to EGP10.5 billion, a growth of 24% YoY, the highest in the Company's history. New residential sales reached EGP9.8 billion with commercial sales accounting for the balance. It is worthy to highlight that Gross Profit margin on 2017 New Sales is currently estimated at 42%, which should be reflected in P&L statements of future reporting periods.
· The number of units sold (residential and commercial) increased 13% YoY to 2,136 units, up from 1,894 units sold during 2016.
· Revenue for the year recorded a growth of 17% YoY reaching EGP6.6 billion.
· Gross Profit grew 25% YoY to reach EGP2.1 billion, a margin of 32%.
· EBITDA improved 33% YoY and amounted to EGP1.3 billion, a margin of 20%.
· Net Profit after Tax and Minority Interest grew 26% YoY to EGP806 million, despite the negative impact of EGP116 million resulting from one-offs associated with securitization and discounting of Receivables, and YoY increase of EGP150 million in finance cost.
· Cash inflow from operations amounted to EGP4.6 billion, a growth of 51% YoY.
· Construction earned value stood at EGP2.1 billion. The Company concluded construction works of five projects during the year.
· PHD concluded securitization and discounting of receivables related to handed over units worth EGP629 million.
· The Company signed the definitive co-development agreement of 3,000 feddan in West Cairo, with the first phase due for launch in April 2018.
· PHD commenced monetization of non-core commercial assets and generated sales of EGP662 million during the year.
· Finalized negotiations with local banks and reduced interest rates applicable to 75% of the Company's debt, helping save EGP100 million over the tenor of the loans.
· The Company handed over 1,781 units, exceeding FY2017 target of 1,600 units. 85% of handed over units were in Palm Parks, Golf Extension, Golf Views, Village Gate Katameya, Village Gate, Hacienda Bay and Hacienda White 2.
Yasseen Mansour, Chairman Comments:
I am very pleased to share with you our full year 2017 financial results, another successful year on all fronts, during which we witnessed strong profitable growth, driven by the ongoing demand and uptake of our products offerings across all operating regions, backed by our dedicated management team.
Our financial results continued to reflect our operational excellence highlighted by an all-time high New Sales of EGP10.5 billion, driven by growth in volume and value of units sold. We believe our market share grew as well with 2,136 units sold throughout 2017. Revenue for the year increased 17% YoY to EGP6.6 billion, which reflected positively on Net Profit recording EGP806 million, a growth of 26% YoY, having in mind that we borne EGP116 million as financial charges relating to securitization and discounting of receivables transactions concluded during the year. We handed over 1,781 units, spent EGP2.1 billion on construction and generated cash flows from operations of EGP4.6 billion.
Our Balance Sheet maintained its strong position with receivables of EGP15.3 billion, covering Net Debt 4.3 times. PHD is planning to conclude securitization transactions of c.EGP1.5-1.8 billion during the year, including EGP700-800 million with expected closing during 1Q2018. The transactions' proceeds will be mostly utilized in debt repayment, as part of the Company's commitment to deleverage the Balance Sheet through its securitization of receivables program.
FY2017 was another exciting year as we continued to replenish our land bank and signed the definitive agreement of the co-development of 3,000 in West Cairo with NUCA and added 135 feddan in the North Coast.
The Company is gearing up to the launch of its largest project ever spreading 3,000 feddan in West Cairo, planned for April 2018 after the issuance of the related ministerial decree. Furthermore, the Company is targeting to launch its co-development project in Alexandria during 2H2018.
We continue to closely monitor our construction cost which increased 29% YoY, in comparison to our selling prices which recorded a YoY growth of 41% for land, 51% and 39% for Built Up Area of standalone units and apartments respectively.
With regards to our recurring income and commercial real estate portfolio, the segment contributed 14% to Net Profit, in line with our strategy to generate 25% in Net Profit from recurring income by FY2020.
Financial Review
Revenue for the year grew 17% YoY to record EGP6.6 billion, driven by the increased pace of construction with 1,781 handed over units, exceeding the previously announced target of 1,600 units. 56% of handed over units were in Hacienda Bay, Village Gate and Golf Extension, coupled with the recognized portion of sold standalone units (on percentage of completion basis) mostly in Palm Hills New Cairo, Hacienda West, The Crown and Woodville, alongside the handover of retail units in Village Gate Katameya Mall. The Company sold one of its non-core land plots (Galala plot in the North Coast) spreading 487k sqm to a non-listed property developer, for a total consideration of EGP375 million during 4Q2017. PHD sold 2,136 units throughout the year, a growth of 13% YoY.
Gross Profit increased to EGP2.1 billion, a growth of 25% YoY, with a margin of 32%, an improvement of 2 pp because of lower cost pressure YoY as the Company is gradually completing old projects that negatively impacted profitability margins during previous reporting periods.
SG&A/Revenue stood at 11.5% in 2017 (11.8% in 2016), and continued to decrease as a percentage of New Sales to 7.2% (7.8% in 2016) despite the unprecedented salary adjustments that took place in 2017 following the devaluation of local currency late 2016. EBITDA grew 33% YoY to record EGP1.3 billion, an EBITDA margin of 20% in 2017 (18% in 2016).
Net Profit after Tax & Minority Interest grew 26% YoY to reach EGP806 million, despite the negative impact of higher finance cost YoY and EGP116 million one-offs associated with discounting and securitization of Receivables. Bottom line was supported by growth in hotels segment revenue, as part of PHD's stake in Macor, where the segment witnessed solid growth of 57% YoY reaching EGP63 million, on the back of gradual tourism recovery and improved business climate.
In 4Q2017, Revenue slightly decreased to EGP1.8 billion due to the YoY change in mix of units/projects sold coupled with lower handed over units of 441 units (597 units in 4Q2016). Nevertheless, Gross Profit grew 12% YoY to EGP627 million, as the Company has nearly concluded old projects with low margins. While EBITDA grew 30% YoY to EGP409 million, mostly on the back of lower SG&A and Cost of Revenue. Net Profit for the quarter recorded EGP339 million, a growth of 44% YoY, despite the increase in interest charges.
Operational Review
New Sales exceeded the EGP9.5 billion target, recording EGP10.5 billion
New Sales for 2017 recorded EGP10.5 billion, a growth of 24% YoY, the highest in the Company's history. New residential sales amounted to EGP9.8 billion with commercial sales accounting for the balance.
During 2017, the Company increased average selling prices by 51% and 39% YoY for BUA of standalone units and apartments, and 41% YoY for land. Growth in sales was driven by the increase in prices and volumes sold, which recorded 2,136 units, a growth of 13% YoY.
In West Cairo, New Sales was driven mainly by demand for residential units in The Crown, Woodville and Golf Extension coupled with commercial units' sales in The Lane and Palm Central. In 4Q2017, the drop in New Sales resulted from lower available for sale inventory in comparison to 4Q2016.
In East Cairo, growth in New Sales was fueled by Palm Hills New Cairo which accounted for EGP4.4 billion in 2017 (cumulative sales of EGP5 billion since launch in November 2016). The Company sold commercial units worth EGP45 million in Village Gate Katameya Mall during 4Q2017.
In the North Coast, the region witnessed solid performance during the summer season supported by the launch of Hacienda West in June 2017, which booked aggregate sales of EGP1.1 million.
In 2017, the Company handed over 1,781 units, surpassing the full year target of 1,600 units. During 4Q2017, the Company delivered 441 units. Construction activities are progressing on schedule with an earned value of EGP2.1 billion in 2017, a growth of 5% YoY.
The recurring income portfolio from three hotels and commercial real estate segment contributed 14% to Net Profits. The number of memberships in Palm Club stood at 2,736 memberships by end of 2017.
The Company is currently considering expanding the number of hotel rooms of Novotel October hotel, given its ongoing strong performance.
Outlook
In 2018, PHD expects a healthy demand for primary housing driven by ongoing house formation and growing migration trend from the capital city of Cairo to the Eastern and Western suburbs. The Company is eyeing New Sales of EGP12 billion for the year, to be fueled by the launch of the 3,000 feddan project in West Cairo which will cater to various income brackets alongside the Company's first project in Alexandria and more phases within recently launched projects.
On the P&L front, the Company is targeting a top line of more than EGP6.8 billion, Net Profit of more than EGP800 million. The Company is planning to handover 1,500 units and spend EGP2.0 billion on construction during FY2018.
With regards to the securitization of receivables program, PHD is planning to monetize receivables up to c.EGP1.8 billion during the year, of which EGP700-800 million will be concluded during 1Q2018.
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 40.6 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 2017, PHD delivered more than 8,132 units within its developments, including more than 3,480 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 EGP11.8 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