7 Feb 2017 08:10
Palm Hills Developments becomes number one Egyptian property developer in terms of New Sales with record Revenue, EBITDA, and handed over units in FY2016
Cairo/London (February 7, 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 December 31, 2016.
Key Highlights
§ The Company continues to reap the benefits of its strategic direction of increasing construction spend while delivering record results driven by the accelerated construction program, becoming the largest property developer in Egypt, as the Company spent more than EGP5 billion on construction in 2014-2016, and thus largely avoided the impact of inflation and recent floatation of the Egyptian Pound.
§ In January 2017, the Company acquired 190 feddan in West Cairo from the Egyptian Ministry of Housing, which is considered a natural extension to Palm Hills Golf Views and Golf Extension, in line with its strategy to replenish the land bank, which is depleting due to the unprecedented demand for its product offerings and strong pace of construction as well as handovers.
§ The first tranche of our c.EGP2.5 billion securitization of receivables program was launched in December 2016 and concluded in January 2017 with net proceeds of EGP404 million, relating to 465 handed over units. The Company expects to monetize receivables of up to c.EGP1.0 billion during FY2017.
FY2016
§ New Sales recorded EGP8.2 billion, a growth of 29% YoY, surpassing FY2015 record of EGP6.3 billion and FY2016 target of EGP7 billion, positioning the Company as the highest selling Egyptian property developer. Growth in New Sales was driven by the strong demand across all regions coupled with an increase in YoY selling prices by 56% and 43% YoY for BUA of standalone units and apartments respectively. The average selling price of land grew 28% YoY.
§ Cash inflows from operations recorded EGP3.0 billion, of which EGP2.0 billion were spent on construction in line with the Company's strategy to invest in construction to hedge inflation and speed up deliveries, in addition to EGP690 million spent on land installments.
§ The Company delivered 2,049 units, translating into 555k sqm of developed area, surpassing FY2016 handovers target of 1,800 units. Handovers grew 30% YoY, in comparison to 1,573 units for the same period last year, driven by the accelerated construction program to conclude all projects under developments during FY2017/2018. Delivered units surpassed the number of units sold during the period. It is worthy to highlight that the Company concluded Village Avenue project during 4Q2016.
§ Despite the changes in accounting standards, Revenue grew 55% YoY to record EGP5.6 billion, a record for the Company, driven by a stronger pace of unit deliveries, accelerated construction activities and healthy sales momentum in existing developments as well as recently launched projects. EBITDA grew 55% YoY recording EGP1.0 billion. Net Profit after Tax & Minority Interest1 grew 8% YoY at EGP640 million, despite the expiry of the Company's tax exemption on December 31, 2015, coupled with higher Minority Interest YoY.
4Q2016
§ New Sales for the quarter marked a strong growth of 60% YoY to record EGP2.7 billion, mainly fueled by the launch of Palm Hills New Cairo during November 2016, recording New Sales of EGP1.1 billion.
§ During the quarter, the Company handed over 597 units, an increase of 11% YoY.
Revenue almost doubled YoY to reach EGP2.0 billion, driven by the increased pace of delivery across all operating regions coupled with a significant increase in average selling prices prior and post the floatation of Egyptian Pound. EBITDA amounted to EGP315 million, an increase of 413% YoY. Net Profit after Tax & Minority Interest grew 40% YoY to record EGP235 million.
Yasseen Mansour, Chairman Comments:
I am very pleased to share with you our fourth quarter and full year 2016 financial results, another record year for the Company in terms of New Sales, profitability and handovers, driven by robust demand for our projects, accelerated pace of construction, supported by our strong management team and stable financial position.
FY2016 was a record year for the Company with New Sales of EGP8.2 billion, a growth of 29% YoY, units delivered recording 2,049 homes and construction amounting to EGP2.0 billion. Our strategy to accelerate construction and leverage up the Balance Sheet over the last three years with a total spend of EGP5 billion has benefited us significantly, allowing us to largely avoid the impact of inflation, caused by the devaluation of local currency and speed up unit deliveries improving customer satisfaction, further cementing Palm Hills Developments as the highest quality developer in Egypt. We remain committed to this strategy in the present inflationary environment and expect to spend EGP2.3 billion on construction and handover 1,600 units during FY2017.
Our financial results reflected our operational excellence with record Revenue of EGP5.6 billion and EBITDA of EGP1.0 billion. Our Balance Sheet maintained its strong position with receivables of EGP11.3 billion covering Net Debt four times. Due to the rising interest rate environment, we opted to de-lever through a securitization of receivables program of c.EGP2.5 billion over 2-3 years. The first tranche was signed during 4Q2016 and transaction concluded in January 2017 with net proceeds of EGP404 million related to receivables due on 465 handed over homes. The securitization program is completely non-recourse to the Company and was concluded at a lower interest than existing debt, which will be fixed over the program's tenor.
Again, FY2016 was an exciting year for the Company, where we continued to replenish our land bank with the acquisition of 190 feddan in West Cairo, strategically located adjacent to Palm Hills Golf Views and Golf Extension, and considered a natural extension to our namesake project Palm Hills. We are in discussions to acquire several new parcels of land including land in Alexandria and the 6,000 feddan in West Cairo. We expect to launch the first phase of apartments in Palm Hills New Cairo, the second phase of Capital Gardens, Hacienda West, and the 190 feddan during FY2017.
Despite the challenging market conditions post the floatation of Egyptian Pound and the resulting inflation, we still expect sales growth in FY2017, buoyed by the launch of Palm Hills New Cairo in November 2016 where we sold 157 standalone units worth EGP1.0 billion in one week.
We continue to closely monitor our construction costs and have partially hedged any increases by securing, through our contractors, bulk deals for steel, cables and aluminum, coupled with increasing our sales prices which recorded a Year on Year growth of 28% for land, 56% and 43% for Built Up Area of standalone units and apartments respectively.
We expect to conclude a number of projects during the year, as we previously promised, including Palm Hills Katameya, Palm Hills Katameya Extension, Village Gate, Casa and Hacienda White 2.
Key Financial Indicators
EGP Million | 4Q2016 | 4Q2015 | Change | FY2016 | FY2015 | Change |
Revenue3 | 2,002 | 1,055 | 90% | 5,631 | 3,642 | 55% |
Gross Profit | 573 | 239 | 140% | 1,679 | 1,150 | 46% |
Gross Profit margin | 28.6% | 22.7% | 5.9pp | 29.8% | 31.6% | (1.8pp) |
EBITDA | 315 | 61 | 413% | 1,015 | 654 | 55% |
EBITDA margin | 15.8% | 5.8% | 10.0pp | 18.0% | 17.9% | 0.1pp |
Net Profit before Tax & Minority Interest2 | 231 | 188 | 23% | 913 | 660 | 38% |
Net Profit after Tax & Minority Interest2 | 235 | 169 | 40% | 640 | 590 | 8% |
Net Profit margin2 | 11.8% | 15.9% | (4.1pp) | 11.4% | 16.2% | (4.8pp) |
Financial Review
Despite the implemented changes in accounting policies since the beginning of FY2016, Revenue3 for the year grew by a remarkable 55% YoY recording EGP5.6 billion, a new record for the Company. Gross Profit for the year grew 46% YoY and amounted to EGP1.7 billion. EBITDA for FY2016 grew by 55% YoY and recorded EGP1.0 billion. Gross profit and EBITDA margins were largely in line with FY2015 at c.30% and 18% respectively.
The growth was driven by the increase in selling prices of land by 28% YoY, and Built up Area of standalone units and apartments by 56% and 43% YoY respectively, the handing over of 2,049 units and accelerated construction spend of EGP2.0 billion.
SG&A/Revenue decreased to 12%, compared to 14% in FY2015. Despite the Company's tax exemption expiring by end of FY2015 and the significant increase in Minority Interest which resulted from the launch of Palm Valley during 1Q2016, Net Profit after Tax & Minority Interest2 for the year increased 8% YoY to EGP640 million.
Revenue for the quarter grew by a remarkable 90% YoY to EGP2.0 billion, boosted by strong deliveries across all operating regions, further supported by the growth in New Sales in East Cairo and increase in average selling prices. Gross Profit for the quarter increased 140% YoY to EGP573 million, mainly driven by stronger execution and 597 handed over units coupled with the increase in average selling prices. EBITDA for the quarter came in strong at EGP315 million. Net Profit after Tax & Minority Interest for the quarter grew 40% YoY reaching EGP235 million.
Net Debt/EBITDA edged up slightly to 2.6x up from 2.3x in FY2015. By end of FY2016, Receivables stood at EGP11.3 billion compared to EGP7.6 billion by end of 2015, supported by the strong YoY growth in New Sales.
Operational Review
New Sales for the year amounted to EGP8.2 billion, a growth of 29% YoY, surpassing FY2015 record of EGP6.3 billion. Growth in New Sales was driven by the YoY increase in average selling prices and new launches. It is worthy to highlight that 58% of units sold during FY2016 were units priced at a range of EGP1.5-7 million.
New Sales for the quarter marked a strong growth of 60% YoY recording EGP2.7 billion, driven by the launch of Palm Hills New Cairo in November 2016, which recorded New Sales of EGP1.1 billion, alongside healthy sales momentum mainly in Golf Extension, Palm Hills Katameya Extension, Palm Valley and Capital Gardens.
In West Cairo, New Sales grew 42% YoY to record EGP3.4 billion during FY2016, of which EGP1.3 billion was generated by Golf Extension, EGP937 million by Palm Valley since the project's launch in March 2016, and EGP595 million by Golf Views.
In East Cairo, New Sales recorded EGP2.9 billion during FY2016, a growth of 53% YoY, boosted by EGP1.1 billion of New Sales in Palm Hills New Cairo, New Sales of EGP801 million in Palm Hills Katameya Extension, as well as strong demand for Capital Gardens where New Sales recorded EGP641 million. It is worthy to highlight that cumulative New Sales in Capital Gardens stood at EGP1.3 billion equivalent to 818 units, since the project was launched in December 2015.
In the North Coast, New Sales stood at EGP1.9 billion and EGP333 million during FY2016 and 4Q2016 respectively despite the seasonality factor where demand for secondary homes is usually much stronger during the summer season.
By end of FY2016, handovers grew by a remarkable 30% YoY to reach 2,049 units, in comparison to 1,573 units for the same period last year. During the fourth quarter, the Company delivered 597 units, an increase of 11% YoY, exceeding the pre-set target for the period.
Our construction activities are progressing on schedule, recording an earned value of EGP2.0 billion in FY2016, an increase of 7% YoY.
With regards to recurring income portfolio and commercial real estate, the segment contributed 11% to Net Profits, mainly from our three hotels and Palm Club, in line with our strategy to achieve 25% in Net Profits from recurring income by FY2020. The number of memberships in Palm Club crossed the 2,300 memberships mark by end of FY2016. The Company finalized all construction works of Phase 8 office building during the year. Construction of Palm Valley's commercial mall commenced during 3Q2016, with plans to finalize the mall's construction during FY2018.
Outlook
As we continue to spend on construction and accelerate the pace of handovers, the Company expects to fully complete a number of projects during FY2017 including Palm Hills Katameya, Palm Hills Katameya Extension, Village Gate, Casa and Hacienda White 2.
While the operating environment will be tough due to the high inflation, we expect growth in sales to be driven by new launches planned for the year including Hacienda West in the North Coast, the recently signed 190 feddan in West Cairo, and new phases of Palm Hills New Cairo and Capital Gardens. The Company expects to monetize receivables of up to c.EGP1.0 billion during FY2017, as part of the securitization program with the objective of deleveraging the Balance Sheet.
With regards to the recurring income and commercial real estate portfolio, the Company expects to finalize all construction works of Village Gate and VGK Malls during FY2017, and to be operational during FY2018.
The Company is currently in active negotiations to acquire on co-development basis 130 feddan in Alexandria. We are still negotiating the terms and conditions of the 6,000 feddan co-development project of West Cairo with NUCA via a jointly formed committee, and hope to finalize the definitive agreement during 1Q2017.
Palm Hills Development Consolidated Income Statement
(Egyptian Accounting Standards)
EGP Thousand | 4Q2016 | 4Q2015 | Change | FY2016 | FY2015 | Change |
Revenue | 2,002,200 | 1,055,406 | 90% | 5,630,639 | 3,641,652 | 55% |
Cost of Revenue | (1,428,708) | (816,022) | 75% | (3,951,476) | (2,491,683) | 59% |
Gross Profit | 573,492 | 239,384 | 140% | 1,679,162 | 1,149,969 | 46% |
Gross Profit margin % | 28.6% | 22.7% | 5.9pp | 29.8% | 31.6% | (1.8pp) |
General administrative, selling and marketing expenses | (258,021) | (177,953) | 45% | (664,116) | (496,142) | 34% |
EBITDA | 315,471 | 61,431 | 413% | 1,015,046 | 653,827 | 55% |
EBITDA margin % | 15.8% | 5.8% | 10.0pp | 18.0% | 17.9% | 0.1pp |
Administrative depreciation | (5,329) | (2,572) | 107% | (13,991) | (9,115) | 53% |
Operating Profit | 310,142 | 58,860 | 427% | 1,001,055 | 644,711 | 55% |
Less: |
|
|
|
|
|
|
Interest expenses - amortization of discount on land liability | - | (3,130) | NA | - | (12,518) | NA |
Finance costs & interests | (24,227) | (4,061) | NA | (57,582) | (38,504) | 49% |
Interest on land purchase liabilities | (31,164) | 75,711 | (141%) | (118,644) | (74,993) | 58% |
Provision | (51,531) | (4,990) | NA | (52,735) | (104,653) | (50%) |
Add: |
|
|
|
|
|
|
Gains on investments in fair value through profit or loss | 1,592 | 2,715 | (41%) | 5,813 | 6,296 | (8%) |
Interest income - amortization of discount on NR | 11,515 | 23,050 | (50%) | 46,061 | 92,198 | (50%) |
Interest income | 15,177 | 39,648 | (62%) | 89,201 | 47,976 | 86% |
Capital gain on investment property | - | - | - | - | 425,736 | NA |
Net Profit Before Income Tax | 231,504 | 187,803 | 23% | 913,170 | 986,249 | (7%) |
Income tax expense | 30,374 | (32,025) | NA | (126,311) | (45,770) | NA |
Deferred tax | (1,037) | 9,226 | NA | (1,603) | 8,026 | NA |
Net Profit after Tax | 260,841 | 165,005 | 58% | 785,256 | 948,505 | (17%) |
Non-controlling interest | (25,354) | 3,657 | NA | (145,460) | (32,942) | NA |
Net Profit after Tax & Minority Interest | 235,487 | 168,661 | 39% | 639,795 | 915,563 | (30%) |
Net Profit after Tax & Minority Interest margin % | 11.8% | 15.9% | (4.1pp) | 11.4% | 25.1% | (13.7pp) |
Palm Hills Development Consolidated Balance Sheet
(Egyptian Accounting Standards)
EGP Thousand | December 31, 2016 | December 31, 2015R |
Long-Term Assets |
|
|
Investments in Associates | 79,226 | 78,506 |
Investment Property | 888,506 | 854,665 |
Notes Receivable - Long Term | 7,300,040 | 4,546,282 |
Projects Under Construction | 877,767 | 858,654 |
Advance Payments for Investments Acquisitions | 184,336 | 184,336 |
Fixed Assets (net) | 351,608 | 334,623 |
Deferred Tax Asset | 10,302 | 11,948 |
Other Long Term Assets | 1,391 | 1,391 |
Employee stock ownership plan (ESOP) | 81,287 | - |
Total Long-Term Assets | 9,774,462 | 6,870,404 |
Current Assets |
|
|
Works in Process | 6,410,746 | 6,463,687 |
Held to Maturity Investments | 153,328 | 613,046 |
Cash & Cash Equivalents | 808,517 | 965,670 |
Notes Receivable - Short Term | 3,295,528 | 2,371,035 |
Investments at Fair Value | 58,471 | 67,113 |
Accounts Receivable | 757,057 | 704,029 |
Suppliers - Advance Payments | 489,064 | 384,777 |
Debtors & Other Debit Balances | 218,477 | 174,854 |
Due from Related Parties | 244,125 | 172,392 |
Minimum Guaranteed Payments - Co-Development Projects | 40,000 | - |
Total Current Assets | 12,475,312 | 11,916,602 |
Total Assets | 22,249,774 | 18,787,006 |
Current Liabilities |
|
|
Banks - Credit Balances | 42,176 | 31,035 |
Banks - Overdraft | 79,410 | 80,237 |
Advances from Customers | 7,744,755 | 6,249,432 |
Completion of Infrastructure Liabilities | 95,083 | 173,648 |
Provisions | 169,387 | 116,844 |
Current Portion of Land Purchase Liabilities | 60,651 | 263,319 |
Due to Related Parties | 131,334 | 226,319 |
Investment Purchase Liabilities | 44,257 | 44,257 |
Notes Payable - Short Term | 974,302 | 473,693 |
Current Portion of Term Loans | 541,015 | 80,814 |
Suppliers & Contractors | 448,466 | 406,850 |
Income Tax Payable | 126,629 | 46,631 |
Creditors & Other Credit Balances | 682,680 | 345,368 |
Total Current Liabilities | 11,140,145 | 8,538,447 |
Working Capital | 1,335,168 | 3,378,155 |
Total Investment | 11,109,629 | 10,248,559 |
Financed as Follows: |
|
|
Shareholders' Equity |
|
|
Issued and Paid-In Capital | 4,617,899 | 4,344,640 |
Legal Reserve | 630,142 | 585,104 |
Special Reserve | 524,213 | 524,213 |
ESOP Re-measurement Reserve | 31,493 | - |
Retained Earnings (Deficit) | (222,479) | (212,391) |
Net Profit for the Period/Year | 639,795 | 915,563 |
Equity Attributable to Equity Holders of Parent Co. | 6,221,064 | 6,157,129 |
Non-controlling Interest | 412,152 | 270,774 |
Total Shareholders' Equity | 6,633,215 | 6,427,903 |
Long Term Liabilities |
|
|
Land Purchase Liabilities | 169,800 | 268,236 |
Notes Payable - Long Term | 612,701 | 148,532 |
Other Long Term Liabilities - Residents' Association | 736,444 | 485,600 |
Loans | 2,957,470 | 2,918,287 |
Total Long Term Liabilities | 4,476,414 | 3,820,656 |
Total Equity & Long Term Liabilities | 11,109,629 | 10,248,559 |
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 27.8 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 4Q2016, PHD delivered more than 6,351 units within its developments, including more than 1,500 units in 12 completed projects. Today, PHD has 14 projects under development, 6 projects in West Cairo, 6 projects in East Cairo and 2 projects in North Coast, translating into a sales backlog exceeding EGP9.6 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
Disclaimer
This presentation contains statements that could be construed as forward looking. These statements appear in a number of 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.