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Final Results

1 Mar 2010 14:42

RNS Number : 8538H

Palm Hills Developments

01 March 2010

PALM HILLS DEVELOPMENTS COMPANY

S.A.E AND ITS SUBSIDIARIES

Full-Year 2009 Earnings Release

A Strong Close to a Challenging Year as PHD Releases FY 2009 Results

Cairo, March 1, 2010 ----Palm Hills Developments (PHDC.CA on the Egyptian Exchange), Egypt's premiere real estate developer, announced today its consolidated financial results for the fiscal year 2009, reporting total sales of EGP 1,145.8 million1 (US$209 million), a decline of just 7% year-on-year despite a challenging first half that saw the Egyptian real estate market enter a downturn. Net sales in Q4 2009, expected to be a slow quarter due to an abundance of national holidays, were up 55% to reach EGP 470.8 (US$ 86 million) compared to EGP 303 million (US$ 55 million) in Q3 2009 and were 237% higher than Q4 2008. Cumulative Reservations reached EGP 9.4 billion (US$ 1.7 billion), including Cumulative Contracts of EGP 7.2 billion (US$ 1.3 billion) and Total Reservations of EGP 2.2 billion (US$ 400 million).

"We are very pleased with how this challenging year has ended," said PHD Chief Executive Officer Yasseen Mansour, noting, "New contracts were up significantly in Q4 2009 both year-on-year and quarter-on-quarter, while cancellations in the fourth quarter were down substantially on quarterly and yearly comparatives. Against this backdrop and in light of broad improvements in consumer sentiment, we are now substantially increasing our construction spending to take advantage of low building materials costs."

Highlights of PHD's FY 2009 results follow below, along with management's analysis of the company's performance and an update on operational developments. Full consolidated financial statements prepared in accordance with International Financial Reporting Standards (IFRS) are available for download on www.palmhillsdevelopments.com.

KEY HIGHLIGHTS

§ Total New Contracts signed in Q4 2009 were valued at EGP 1.0 billion (US$ 182 million), an increase of 115% over the same quarter of the previous year as management targeted the conversion of reservations into contracts. Total contracts signed in FY 2009 stood at EGP 3.3 billion (US$ 601 million), a 5.0% rise over the previous year despite challenging market conditions.

§ Total New Reservations in Q4 2009 stood at EGP 580 million (US$ 106 million), a 31% rise over the same quarter of the previous year.

§ PHD's Customer Base grew 35.5% to 5,750 clients at year's end on the back of management's strategy of attracting new customers through the diversification of both core products and the price ranges at which they were offered. New clients accounted for 85% of units sold in FY 2009.

§ Net Sales in Q4 2009 reached EGP 470.8 million (US$ 86 million), 237% higher than Q4 2008, signaling a healthy recovery in market sentiment. FY 2009 sales totaled EGP 1,145.8 million (US$ 209 million), a decline of just 7% despite a very challenging first half. This also comes as a result of the increased share of apartments in the revenue contribution (apartments are recognized only at 100% completion).

§ Net Operating Profit (EBIT) rose to EGP 139.4 million (US$ 25 million) in Q4 2009, a sharp 266% increase over the same quarter of the previous year. Net operating profit for the year dipped 31% to EGP 503 million (US$ 92 million), reflecting the decline in sales and an increase in COGS balanced against an 11% dip in SG&A expenditures (see Financial Performance, below). EBIT margins contracted 15.2 percentage points to close the year at 43.9%.

§ Net Profit climbed 38.8% to EGP 185.1 million (US$ 34 million) in Q4 2009 compared with the previous quarter. On the full year, net profit fell 28% to EGP 475.6 million (US$ 87 million), in line with expectations after a challenging first half. Net profit margin for the year stood at a healthy 41.5%.

§ Total Land Bank remained unchanged at 48.8 million square meters.

§ Ratio of Bank Debt to Equity2 dipped slightly from 22% at the end of Q4 2008 to 21.6% at the end of Q4 2009, leaving ample room to take on new debt to finance both an accelerated pace of construction and new expansion.

1Palm Hills Developments issues its financials in Egyptian Pounds (EGP) and advises that those seeking to convert to US dollars do so at a rate of USD 1 = EGP 5.49 for FY 2009.

2Calculated as (Bank Overdrafts + Term Loans) / Total Equity

Click on, or paste the following link into your web browser, to view the associated PDF document.

http://www.rns-pdf.londonstockexchange.com/rns/8538H_1-2010-3-1.pdf

Operational Highlights of 2009: Deriving Strength from Adversity

Despite a challenging first half that saw the Egyptian real estate market forced into a downturn by the spillover of the global economic crisis into the local market, Palm Hills Developments closed 2009 in a more advantageous competitive position than ever. PHD has long had one of the largest, most attractive and most diverse land banks in Egypt; unparalleled dual construction arms, giving it the ability to simultaneously deliver multiple projects; and the balance-sheet strength to support those activities.

While the challenges of the year just past were undeniable, PHD management took prompt action to: diversify the company's client base and product mix; increase its ability to respond to market developments; expand its new construction capacity; position the company to substantially diversify its revenue base in the coming five years; and further strengthen its balance sheet through a judicious mix of both equity and debt to support these activities.

Cumulative reservations reached EGP 9.4 billion (US$ 1.7 billion) as at year's end, with favorable trends in gross reservations (up 31% year-on-year in Q4 2009), declining cancellations (down 4% between Q4 2009 and Q3 2009 and 28.5% from Q4 2008), and the conversion of EGP 1 billion (US$ 182 million) in reservations into signed contracts in Q4 2009. Total contracts signed in 2009 were valued at EGP 3.3 billion (US$ 601 million), a 5% rise over the pervious year. As of FY 09, total contracted units reached EGP 7.2 billion (US$ 1.3 billion), an increase of 84% over 2008 total contracted units of EGP 4.3 billion (US$ 783 million).

Net sales in Q4 2009 rose 55% compared with the previous quarter to EGP 470.8 million (US$ 86 million) and were 237% higher than Q4 2008 despite it being slow season due to the number of national holidays. FY 2009 sales totaled EGP 1,145.8 million (US$ 209 million), a decline of just 7% despite a very challenging first half. Positive sales momentum beginning in Q2 2009 came as a result of a management's sustained effort to diversify PHD's product base at prices that make PHD accessible to a broader group of consumers.

The company's operational and financial flexibility allow management to rapidly react to market conditions. While sales of primary homes in the Greater Cairo Area proved challenging in the first half of 2009, high demand for second homes / vacation homes as underscored by strong sales of Hacienda Bay (Zone 1), for example, led management to rapidly launch Hacienda White (Zone 1) in Q3 2009. Hacienda White (Zone 1) was 100% sold shortly after launch.

At present, PHD is actively constructing five developments in West Cairo, four developments in East Cairo and one on the North Coast, with plans to begin construction on three additional developments in 2010. Heading into this year, management moved to accelerate the pace of build-out to capture the benefits of low construction material costs at a time of improving consumer sentiment. PHD's ability to rapidly deliver multiple simultaneous projects through its in-house construction team was enhanced by the roll-out in 2009 of its joint venture construction operation signed in 2008 with leading builder Hassan Allam & Sons.

While PHD already has the largest dedicated sales team of any developer in Egypt, management moved in 2009 to both broaden and deepen its distribution network through a strategic partnership with a leading Egyptian realtor and the launch of PHD-owned points of sale in London and the Gulf Cooperation Council. The targeting of high-value offshore clients comes at the same time as management increasingly targets Egypt's large upper-middle income consumer population by offering smaller plots and unit sizes.

In the year just ended, management took significant steps toward its goal of developing a recurring revenue stream. Management's priority areas include hospitality, retail and office space, and education. The company has previously disclosed that it is in negotiations to acquire a controlling stake in Maccor, Inc., which has majority and minority stakes in hotel establishments, with a strategy of establishing budget hotels under the Accor brand. These hotels will be located in urban areas in Cairo or in other regions of Egypt. Also in the hospitality sector, PHD announced in May 2009 that the Ritz-Carlton Hotel Company would manage the Ritz-Carlton Palm Hills at Palm Hills October. Most recently, the company concluded a memorandum of understanding that will see luxury operator Taj Hotels, Resorts and Palaces (Indian Hotels Company Ltd.) manage three PHD hotel properties, one each in Ain Sokhna (Red Sea), the North Coast and the historic city of Aswan.

PHD took significant steps in 2009 to shore up an already very healthy balance sheet in anticipation of accelerating its construction spending in 2010 and beyond (see details in Financial Performance, below).

Finally, management believes that PHD's brand equity on the local market is as strong as ever, as underscored by the sell-out of Hacienda White (Zone I) and the substantial conversion of nearly EGP 2 billion (US$ 364 million) in reservations into signed contracts during the second half of the year.

Financial Performance

The drive to capture the benefits of low building materials prices by accelerating the pace of construction on multiple projects is supported by a robust balance sheet. Management notes a healthy debt-to-equity ratio of 21.6%, which it plans to grow through both an EGP 500 million (US$ 91 million) loan agreement concluded with Banque Misr and a further EGP 567 million (US$ 103 million) syndicated loan arranged by CIB. Moreover, management has obtained Board approval to explore a bond issue of up to EGP 1 billion (US$ 182 million). Expansion on the debt side will be balanced in part by an EGP 700 million (US$ 128 million) capital increase presently due to begin on 8 March 2010 via a rights issue of 349,440,000 shares at par (EGP 2 per share).

The recovery of sales momentum that began in Q3 2009 accelerated in the final quarter of the year despite the confluence of national holidays. The 55% rise in net sales to EGP 470.8 million (US$ 86 million) in Q4 2009 over Q3 2009 reflects the recognition for the first time of the Built-up Area (BuA) at three projects (Cascade, Golden, Bamboo); substantial conversions of reservations into contracts in the Golf, Golf Extension and Bamboo Extension projects; and new revenues from land sales in Village Gardens October.

Importantly, SG&A expenses declined 11% in FY 2009 compared with the previous year on the back of a strict program of cost control. The 121% increase in SG&A spending in Q4 2009 compared to the previous quarter owes primarily to an 86% rise in marketing and advertising spending as the company launched its first television campaign in both the Arabic and English languages. The Q4 2009 SG&A line item also records salaries and year-end bonuses as well as professional fees that are contractually recognized at year's end.

Land Bank

The size of the land bank remains unchanged at 48.8 million square meters in FY 2009 compared with the previous fiscal year. PHD's focus in 2009 was on the execution of its existing projects. Management's goal is to capitalize on current favorable cost-saving conditions, boosting EBITDA margins and decreasing construction costs. Nonetheless, the company remains diligent regarding the pursuit of compelling land acquisition opportunities that complement its existing developments.

Outlook

PHD maintains a very positive view of the Egyptian real estate market. Although Egypt's large, fast-growing population, expanding economy, and long-term fundamentals of the fast-developing infrastructure base make the country highly attractive going forward, management also continues to explore interesting opportunities outside Egypt that would allow it to exploit the strength of its balance sheet and of its operational know-how.

Management is optimistic that barring an exogenous shock, consumer sentiment will continue to recover in Egypt throughout 2010. Sales growth at new distribution points in Europe (London) and the GCC will be driven largely by economic developments in those markets.

Table 1 -Full Year 2009 vs. Full Year 2008 Operating Results (EGP '000)3

	12 Months Ended
	31/12/2009	31/12/2008
SALES (NET)	1,145,795	1,234,806
Cost of Sales	(454,520)	(293,340)
GROSS PROFIT	691,274	941,466
Margin%	60.33%	76.24%
Selling, General & Administrative Expenses	(178,313)	(201,239)
EBITDA	512,962	740,327
Margin%	44.77%	59.95%
Depreciation and Amortization	(10,001)	(10,266)
OPERATING PROFIT (EBIT)	502,960	730,062
Margin%	43.90%	59.12%
Other Income	29,972	24,593
Interest Income - Amortization of Discount	116,266	73,084
Finance Costs	(25,956)	(37,977)
Interest Exp. - Amortization of Discount	(63,254)	(70,546)
PROFIT BEFORE TAX	559,987	719,216
Income Tax Expense	(39,892)	(59,172)
PROFIT FOR THE YEAR	520,096	660,044
Minority Interest	(44,500)	(2,365)
NET PROFIT AFTER MINORITY	475,595	657,678
Margin%	41.51%	53.26%

N.B

Palm Hills Developments recognizes its villas and town houses revenues from land upon signature of a contract while revenues from construction are recognized on a percentage of completion basis with a minimum threshold of 50%. Revenues from apartments and multi tenant buildings are recognized upon delivery. As a result, total revenues figure on the Income Statement during a period does not reflect neither reservations nor construction revenues from villas and town houses less than 50% completed or any revenues from apartments.

3Figures presented are prepared according to IFRS

Table 2 - Q4 2009 Vs. Q4 2008 Operating Results (EGP '000)4

	3 Months Ended
	31/12/2009	31/12/2008
SALES (NET)	470,750	139,532
Cost of Sales	(246,479)	(26,740)
GROSS PROFIT	224,271	112,792
Margin%	47.64	80.84
Selling, General & Administrative Expenses	(82,292)	(67,701)
EBITDA	141,979	45,091
Margin%	30.16%	32.32%
Depreciation and Amortization	(2,551)	(7,001)
OPERATING PROFIT (EBIT)	139,428	38,090
Margin%	29.62%	27.3%
Other Income	16,147	(16,650)
Interest Income - Amortization of Discount	10,775	43,719
Finance Costs	16,611	25,746
Interest Exp. - Amortization of Discount	(21,272)	(10,899)
PROFIT BEFORE TAX	161,689	80,006
Income Tax Expense	16,771	37,736
PROFIT FOR THE YEAR	178,460	117,742
Minority Interest	6,613	(4,275)
NET PROFIT AFTER MINORITY	185,074	113,467
Margin%	39.31%	81.32%

N.B

4Figures presented are prepared according to IFRS

-----------------------------------------------

Yasseen Mansour

Chairman and Chief Executive Officer

PALM HILLS DEVELOPMENTS COMPANY

S.A.E AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

31 DECEMBER 2009

Palm Hills Developments Company S.A.E and its Subsidiaries

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For The Year Ended 31 December 2009

		2009	2008
	Notes	EGP	EGP

Sales	3	1,145,794,530	1,234,805,955
Cost of sales	3	(454,520,059)	(293,339,733)

GROSS PROFIT		691,274,471	941,466,222

Selling and administrative expenses	4	(188,314,148)	(211,404,705)
Interest income	5	126,715,680	73,084,467
Finance costs	6	(89,210,822)	(108,523,476)
Other income	7	19,522,304	24,593,422

PROFIT BEFORE INCOME TAX		559,987,485	719,215,930

Income tax expense	8	(39,891,672)	(59,172,013)

PROFIT FOR THE YEAR		520,095,813	660,043,917

Other comprehensive income		-	-

TOTAL COMPREHENSIVE INCOME FOR THE YEAR		520,095,813	660,043,917

Profit attributable to:
Equity holders of the parent		475,595,463	657,678,480
Non-controlling interests		44,500,350	2,365,437

		520,095,813	660,043,917


Basic and diluted earnings per share for profit attributable to the equity holders of the parent (expressed in EGP per share)	30	0. 68	0.99

The attached notes from 1 to 37 are an integral part of these consolidated financial statements.

Palm Hills Developments Company S.A.E and its Subsidiaries

CONSOLIDATED BALANCE SHEET

As at 31 December 2009

		2009	2008(Restated)
	Notes	EGP	EGP
ASSETS
Non-current assets
Investment property	9	482,708,874	-
Property and equipment	10	90,015,330	543,044,803
Advance payments for investments acquisition	11	164,685,643	470,650,012
Investment in an associate	12	245,000	245,000
Intangible assets	13	42,400,000	47,700,000
Notes receivable	15	2,501,188,468	1,658,430,196

		3,281,243,315	2,720,070,011

Current assets
Notes receivable	15	966,977,453	683,086,670
Accounts receivable and prepayments	16	547,178,797	318,770,683
Bank balances and cash	17	134,924,165	279,712,833
Financial assets at fair value through profit or loss - Held for trading	18	127,631,947	203,433,368
Development properties	19	5,473,529,413	4,940,216,448

		7,250,241,775	6,425,220,002

TOTAL ASSETS		10,531,485,090	9,145,290,013

EQUITY AND LIABILITIES
Equity
Share capital	20	1,397,760,000	931,840,000
Share premium		-	890,538,204
Statutory reserve	21	516,095,272	13,635,814
Retained earnings		1,248,522,262	851,375,963

Equity attributable to equity holders of the parent		3,162,377,534	2,687,389,981
Non-controlling interests		247,981,463	144,810,439

Total equity		3,410,358,997	2,832,200,420

Non-current liabilities
Term loans	22	354,708,225	379,591,680
Land purchase liabilities	23	871,964,874	1,652,579,957
Notes payable	24	1,947,622,838	1,172,180,388
Other non-current liabilities	25	253,061,500	164,874,504
Deferred tax liability	8	2,114,985	2,124,436

		3,429,472,422	3,371,350,965

Current liabilities
Bank overdrafts	17	145,998,987	111,249,739
Current portion of term loans	22	234,780,818	136,405,712
Current portion of land purchase liabilities	23	319,473,282	298,545,082
Accounts payable and accruals	27	253,220,514	307,808,589
Notes payable	24	400,271,559	261,212,904
Advances from customers	28	328,108,629	532,172,134
Billings in excess of costs	29	1,969,898,759	1,236,749,032
Income tax payable	8	39,901,123	57,595,436

		3,691,653,671	2,941,738,628

Total liabilities		7,121,126,093	6,313,089,593

TOTAL EQUITY AND LIABILITIES		10,531,485,090	9,145,290,013

Ehab Swellem		Yasseen Mansour
(Chief Financial Officer)		(Chairman)

Palm Hills Developments Company S.A.E and its Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For The Year ended 31 December 2009	Attributable to equity holders of the parent

	Share capital	Share premium	Statutory Reserve	Retained earnings	Total		Non-controlling interests	Total

	EGP	EGP	EGP	EGP		EGP	EGP	EGP

Balance as at 1 January 2009	931,840,000	890,538,204	13,635,814	851,375,963		2,687,389,981	144,810,439	2,832,200,420
Comprehensive income
Profit for the year	-	-	-	475,595,463		475,595,463	44,500,350	520,095,813
Other comprehensive income	-	-	-	-		-	-	-

Total comprehensive income for 2009	-	-	-	475,595,463		475,595,463	44,500,350	520,095,813

Share dividends	465,920,000	(430,293,851)	-	(35,626,149)		-	-	-
Transfer to statutory reserve	-	(460,244,353)	502,459,458	(42,215,105)		-	-	-
Non-controlling interests arising from capital increase of subsidiaries	-	-	-	(607,910)		(607,910)	25,929,111	25,321,201
Non-controlling interests arising from business combination (note 14)	-	-	-	-		-	32,741,563	32,741,563

Balance at 31 December 2009	1,397,760,000	-	516,095,272	1,248,522,262		3,162,377,534	247,981,463	3,410,358,997

Palm Hills Developments Company S.A.E and its Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For The Year ended 31 December 2008	Attributable to equity holders of the parent

	Share capital	Share premium	Statutory Reserve	Retained earnings	Total	Non-controlling interests	Total

	EGP	EGP	EGP	EGP	EGP	EGP	EGP

Balance as at 1 January 2008	800,000,000	-	13,635,814	225,911,021	1,039,546,835	103,457,918	1,143,004,753
Correction of an error (note 36)	-	-	-	(213,538)	(213,538)	213,538	-

Balance as at 1 January 2008 (restated)	800,000,000	-	13,635,814	225,697,483	1,039,333,297	103,671,456	1,143,004,753
Comprehensive income
Profit for the year	-	-	-	657,678,480	657,678,480	2,365,437	660,043,917
Other comprehensive income	-	-	-	-	-	-	-

Total comprehensive income for 2008	-	-	-	657,678,480	657,678,480	2,365,437	660,043,917

Proceeds from shares issued	131,840,000	890,538,204	-	(32,000,000)	990,378,204	-	990,378,204
Amounts paid under capital increase by non-controlling interests	-	-	-	-	-	11,453,750	11,453,750
Non-controlling interests arising from capital increase of subsidiaries	-	-	-	-	-	37,329,067	37,329,067
Non-controlling interests arising from business combination (note 14)	-	-	-	-	-	1,051,808	1,051,808
Acquisition of non-controlling interests	-	-	-	-	-	(11,061,079)	(11,061,079)

Balance at 31 December 2008	931,840,000	890,538,204	13,635,814	851,375,963	2,687,389,981	144,810,439	2,832,200,420

Palm Hills Developments Company S.A.E and its Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS

For The Year Ended 31 December 2009

	2009	2008
	EGP	EGP
OPERATING ACTIVITIES
Profit before income tax	559,987,485	719,215,930
Depreciation of property and equipment	27,150,514	13,571,791
Amortization of intangible assets	5,300,000	5,300,000
Interest income	(126,715,680)	(73,084,467)
Finance cost	89,210,822	108,523,476

	554,933,141	773,526,730
Working capital adjustments:
Increase in notes receivable	(1,010,383,207)	(1,406,829,003)
Decrease (increase) in financial assets at fair value through profit or loss - held for trading	75,801,421	(203,433,368)
(increase) in accounts receivable and prepayments	(193,555,027)	(208,828,356)
(Increase) in development properties	(220,501,226)	(384,085,432)
Increase in notes payable	304,876,798	-
(Decrease) increase in accounts payable and accruals	(32,708,219)	6,874,288
(Decrease) increase in advances from customers	(245,488,033)	39,233,870
Increase in billings in excess of costs	733,149,727	770,617,423
Increase in other non-current liabilities	88,186,996	130,520,210

Cash from (used in) operations	54,312,371	(482,403,638)
Interest paid	(25,956,351)	(37,977,130)
Tax paid	(57,595,436)	(31,628,887)

Net cash flows used in operating activities	(29,239,416)	(552,009,655)

INVESTING ACTIVITIES
Purchase of properties and equipment	(26,187,410)	(76,614,849)
Proceeds from sale of properties and equipment	37,102	-
Purchase of investment properties	(30,679,607)	-
Purchase of intangible assets	-	(53,000,000)
Acquisition of subsidiaries, net of cash acquired (note 14)	(195,879,969)	(79,514,396)
Advance payments for investments acquisition	(6,851,300)	(362,278,179)
Interest received	10,449,832	33,942,909

Net cash flows from (used in) investing activities	(249,111,352)	(537,464,515)

FINANCING ACTIVITIES
Proceeds from shares issued	-	990,378,204
Acquisition of non-controlling interests	-	(11,061,079)
Proceeds from borrowings	157,000,771	376,331,638
Repayments of borrowings	(83,509,120)	(46,524,566)
Amounts paid under capital increase by non-controlling interests	-	11,453,750
Non-controlling interests arising from capital increase of subsidiaries	25,321,201	37,329,067

Net cash flows from financing activities	98,812,852	1,357,907,014

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(179,537,916)	268,432,844

Cash and cash equivalents at 1 January	168,463,094	(99,969,750)

CASH AND CASH EQUIVALENTS AT 31 DECEMBER	(11,074,822)	168,463,094

Investing and financing activities that did not require the use of cash and cash equivalents are excluded from the cash flow statement. The group did not enter into such transactions during 2009 and 2008.

The attached notes from 1 to 37 are an integral part of these consolidated financial statements.

Palm Hills Developments Company S.A.E and its Subsidiaries

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2009

1 ACTIVITIES

Palm Hills for Development Company (S.A.E) was established according to the Investment Incentives and Guarantees Law No. (8) of 1997 and the Companies Law No.159 of 1981 and their executive regulations, taking into consideration the statutes of the Capital Market Law No. 95 of 1992 and its executive regulations. The company's headquarter is located in 6th of October City in Giza Governorate, where the main branch is located in Smart Village.

The company is registered in the Commercial Register under No. (6801) on 10 January 2005, and was listed in the unofficial schedule no. (2) Of the Cairo and Alexandria Stock Exchanges on 27 December 2006. The company got listed in the official schedule no. (1) Of the Cairo and Alexandria Stock Exchange on April 2008 and in London stock exchange on 8 May 2008.

The company was established to invest in real estate in the New Cities and New Urban Communities including building, constructing, possessing and managing residential compounds, resorts, villas and tourist villages, sale or lease as well as all the services, facilities, leasing and construction of integrated projects and managing the entertainment activities associated with the company's in activities. All such activities are subject to the approval of appropriate authorities.

These group consolidated financial statements were authorized for issue by the board of directors on xx February 2010.

All the company operations are located in Egypt; it has only one identifiable operating segment which is real estate development.

The company participated in the capital of twelve subsidiary companies as follows:

1-New Cairo for Real Estate Developments S.A.E

New Cairo for Real Estate Development S.A.E. is registered in Egypt under commercial registration number 12613 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in plot 36 South investors' area in new Cairo. The company is engaged in construction, management, and the sale of hotels, motels, buildings and residential compounds and the purchase, development, dividing and sale of land.

The company's fiscal year ended 31 December of each year.

2-Royal Gardens for Real Estate Investment Company S.A.E

Royal Gardens for Real Estate Investment Company S.A.E. is registered in Cairo under commercial registration number 21574 under the provisions of under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 11 El-Nakhil Street - Dokki-Giza. The company is engaged in real estate investment in cities and new urban communities and the set up, execution, acquisition, and management of urban communities, resorts, villas and tourist villages through sale or lease. The company is also involved in all other types of related services such as finance leasing and construction.

The company's fiscal year ended 31 December of each year.

3-Palm Hills Middle East Company for Real Estate Investment S.A.E and Its Subsidiary

Palm Hills Middle East Company for Real Estate Investment S.A.E and its subsidiary, Middle East Company for Real Estate and Touristic Investment S.A.E are engaged in real estate investment in new cities and urban communities, and also the construction, ownership and management of residential compounds, resorts, and villas. The company and its subsidiary are also involved in the sale and lease and other related services for managing integrated projects and entertainment activities.

The company is registered in Egypt under commercial registration number 21091. The company's subsidiary is registered in Egypt under commercial registration number 25016. Both companies are registered under the provisions of under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992.

The companies' fiscal year ended 31 December of each year.

4- Middle East for Development and Investment Touristic S.A.E

Middle East for Development and Investment Touristic S.A.E. is registered in Egypt under commercial registration number 25015 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 40 Lebanon Street - Mohandessin- Giza.

The company is engaged in real estate investment in cities and new urban communities and the set up, execution, acquisition, and management of urban communities, resorts, villas and tourist villages through sale or lease. The company is also involved in all other types or relevant services such as finance lease and construction of the company's projects or others'.

The company's fiscal year ended 31 December of each year.

5- Gamsha for Tourist Development S.A.E

Gamsha for Tourist Development S.A.E. is registered in Egypt under commercial registration number 23889 under the provisions of the Companies' Law No 159 of 1981. The company is located in 11 El Nakhil Street-Dokki-Giza. The company is engaged in real estate investments in new cities, urban communities, remote areas and regions outside the old valley.

The company's fiscal year ended 31 December of each year.

6- Nile Palm Al-Naeem for Real Estate Development S.A.E

Nile Palm Al-Naeem for Real estate Development S.A.E. is registered in Egypt under commercial registration number 27613 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 40 Lebanon Street - Mohandessin- Giza. The company is engaged in real estate investment in new cities and urban communities, and also in the construction, ownership and management of residential compounds, resorts, and villas.

The company's fiscal year ended 31 December of each year.

7- Saudi Urban Development Company S.A.E

Saudi Urban Development (Company) S.A.E. is registered in Egypt under commercial registration number 1971 under the provisions of the Companies' Law No 159 of 1981. The company is located in 72 Gamet El-Dewal El Arabia Street-Mohandeseen-Cairo. The company is engaged in the construction of advanced residential projects.

The company's fiscal year ended 31 December of each year.

8- Rakeen Egypt for Real Estate Investment S.A.E

Rakeem Egypt for Real Estate Investment S.A.E. is registered in Egypt under commercial registration number 22996 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th of October City. The company is engaged in leasing, construction and operation of hotels, motels, resorts and residential compounds, construction, generation of electricity, desalination of water, land acquisition, dividing and constructing villas, residential units and offices malls and the marketing thereof..

The company's fiscal year ended 31 December of each year.

9- Al Naeem for Hotels and Touristic Villages S.A.E

Al Naeem for Hotels and Touristic Villages S.A.E. is registered in Egypt under commercial registration number 32915 under the provisions of the Investment Guarantees and Incentives law No. 8 of 1997 and the Companies' Law No 159 of 1981 and the statutes of Capital Market Law No 95 of 1992. The company is located in 6th of October City. The company is engaged in construction and operation of hotels in Hamata.

The company's fiscal year ended 31 December of each year.

10- Gawda for Trade Services S.A.E

Gawda for Trade Services S.A.E. is registered in Egypt under commercial registration number 10242 under the provisions of the Companies' Law No 159 of 1981. The company is located in 66 Gamet El-Dewal El Arabia Street-Mohandeseen-Cairo. The company is engaged in real estate investments in new cities, urban communities, remote areas and regions.

The company's fiscal year ended 31 December of each year.

11- New East Cairo for Real Estate Development S.A.E

New East Cairo for Real Estate Development was established under the name of Kappci Company for Real Estate and touristic Development -S.A.E according to Law No. 159 of 1981 and its executive regulation and the company was registered under commercial registration No. 1429 of Ismailia at 20 March 2007.

The company's name was modified at 25 June 2008 to New East Cairo for Real Estate Development and the company's location was changed to 35 Abo Bakr El Sedik St., - Heliopolis and it registered at the commercial registration of Cairo at 13/11/2008.

The company is established to operate in all the fields of Real Estate investments, construction, and development of residential areas.

The company's fiscal year ended 31 December of each year.

12- City for Real Estate Development S.A.E

City for Real Estate Development -S.A.E. - was established at 2007 according to the laws applicable in Egypt under the provisions of the Companies' Law No 159 of 1981. At 23 October 2007 the company was registered in commercial registration no. 27962.

The company is engaged at the lands' construction development (at all governorates except North and South Sinai and North El Kantara needs the permission of the association) and provide these lands with all facilities and services.

The company's fiscal year ended 31 December of each year.

2.1 BASIS OF PREPARATION

Preparation of consolidated financial statements

The consolidated financial statements have been prepared on a historical cost basis, except for financial assets at fair value through profit or loss that have been measured at fair value. The consolidated financial statements are presented in Egyptian Pound (EGP).

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. Management believes that the underlying assumptions are appropriate. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 2.4.

Statement of compliance

The consolidated financial statements of Palm Hills Developments S.A.E and its subsidiaries ('the group') have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Income and cash flow statements

The Group presents its income statement by nature of expense.

The Group reports cash flows from operating activities using the indirect method.

Cash flows from investing and financing activities are determined using the direct method.

Basis of consolidation

(a) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the income statement.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

(b) Transactions and minority interests

The group applies a policy of treating transactions with minority interests as transactions with parties external to the group. Disposals to minority interests result in gains and losses for the group and are recorded in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary.

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The group's investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

The group's share of its associates' post-acquisition profits or losses is recognized in the income statement, and its share of post-acquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group's share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealized gains on transactions between the group and its associates are eliminated to the extent of the group's interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the group. Dilution gains and losses arising in investments in associates are recognized in the income statement.

2.2 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES

The accounting policies adopted are consistent with those of the previous financial year except as follows:

(a) Standards and amendments to existing standards effective 1 January 2009

The following standards, amendments and interpretations, which became effective in 2009, are of relevance to the Group:

Standard/ interpretation	Content	Applicable for financial years beginning on/after
IAS 1	Presentation of financial statements	1 January 2009
IAS 23	Borrowing costs	1 January 2009
IFRS 7	Amendment: Improving disclosures about financial instruments	1 January 2009
IFRS 8	Operating segments	1 January 2009
IFRIC 15	Agreements for the construction of real estate	1 January 2009
IAS 40R	Investment property	1 January 2009

• IAS 1, 'Presentation of financial statements'

A revised version of IAS 1 was issued in September 2007. The revised standard prohibits the presentation of items of income and expenses (that is, 'non-owner changes in equity') in the statement of changes in equity, requiring 'non-owner changes in equity' to be presented separately from owner changes in equity in a statement of comprehensive income. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity; all non-owner changes in equity are presented in the consolidated statement of comprehensive income. The adoption of this revised standard impacts only presentation aspects; therefore, it has no impact on profit or earnings per share.

• IAS 23, 'Borrowing costs'

A revised version was issued in March 2007. Under the revised standard, an entity is required to capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs was removed. The capitalization is required for qualifying assets for which the commencement date for capitalization is on or after 1 January 2009. The Group has applied this standard in accordance with the transition provisions.

• Amendment: IFRS 7, 'Improving disclosures about financial instruments'

The IASB published amendments to IFRS 7 in March 2009. The amendment requires enhanced disclosures about fair value measurements and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a three-level fair value measurement hierarchy. In addition to that, the amendment clarifies that the maturity analysis of liabilities should include issued financial guarantee contracts at the maximum amount of the guarantee in the earliest period in which the guarantee could be called; and secondly requires disclosure of remaining contractual maturities of financial derivatives if the contractual maturities are essential for an understanding of the timing of the cash flows. The entity has to disclose a maturity analysis of financial assets it holds for managing liquidity risk, if that information is necessary to enable users of its financial statements to evaluate the nature and extent of liquidity risk. The adoption of the amendment results in additional disclosures but does not have an impact on profit or earnings per share.

IFRS 8, 'Operating segments'

IFRS 8 replaces IAS 14, 'Segment reporting', and is effective for annual periods beginning on or after 1 January 2009. The new standard requires a 'management approach', under which segment information is presented on a similar basis to that used for internal reporting purposes. There is no effect on the Group as the Group has only one business segment and no geographical segments.

• IAS 40, 'Investment property', amendment (and consequential amendment to IAS 16, 'Property, plant and equipment')

The amendments are part of the IASB's annual improvements project published in May 2008 and are effective from 1 January 2009. Property that is under construction or development for future use as investment property is brought within the scope of IAS 40. Where the fair value model is applied, such property is measured at fair value. However, where fair value of investment property under construction is not reliably determinable, the property is measured at cost until the earlier of the date construction is completed and the date at which fair value becomes reliably measurable. There is no effect for the adoption by the Group, as the Group has adopted the cost model for accounting for its investment properties as an allowed alternative option for measuring investment property by IAS 40.

• IFRIC 15, 'Agreements for the construction of real estate' (effective from 1 January 2009)

The interpretation clarifies whether IAS 18, 'Revenue' or IAS 11 'Construction contracts' should be applied to particular transactions. The Group determined that agreements for the construction of villas and townhouses meet the criteria of construction contracts and therefore falls within the scope of IAS 11, while sale of land and apartments falls within the scope of IAS 18. No effect of the implementation on the Group's financial statements as the Group contracts with its customer to construct and sell villas had previously met and continues to meet the definition of a construction contract as defined in IAS 11.

• 'Improvements to IFRS' (issued in May 2008)

The Improvements project contains numerous amendments to IFRS that the IASB considers non-urgent but necessary. 'Improvements to IFRS' comprise amendments that result in accounting changes for presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. Most of the amendments are effective for annual periods beginning on or after 1 January 2009. No material changes to accounting policies arose as a result of these amendments except to the amendments to IAS 40, 'Investment property' (see above).

(b) Interpretations and amendments to standards becoming effective in 2009 but not relevant to the Group:

Standard/interpretation	Content	Applicable for financial years beginning on/after
IAS 32 and IAS 1	Puttable financial instruments and obligations arising on liquidation	1 January 2009
IFRS 1 and IAS 27	Cost of an investment in a subsidiary, jointly-controlled entity or associate	1 January 2009
IFRS 2	Share-based payments - Vesting conditions and cancellations	1 January 2009
IFRIC 13	Customer loyalty programmes	1 July 2008
IFRIC 16	Hedges of a net investment in a foreign operation	1 October 2008

(c) Standards, amendments and interpretations that are not yet effective and not expected to have significant impact on the Group's financial statements:

Standard/interpretation	Content	Applicable for financial years beginning on/after
IAS 27	Consolidated and separate financial statements	1 July 2009
IFRS 3	Business combinations	1 July 2009
IFRS 9	Financial instruments: Classification and measurement	1 January 2013
IAS 24*	Related party disclosures	1 January 2011
IAS 32*	Classification of rights issues	1 February 2010
IAS 39*	Financial instruments: Recognition and measurement - Eligible hedged items	1 July 2009
IFRS 1*	First-time adoption of International Financial Reporting Standards	1 July 2009
Amendment: IFRS 1* Amendment: IFRS 2*	Additional exemptions for first-time adopters Group cash-settled share-based payment transactions	1 January 2010
IFRIC 17*	Distribution of non-cash assets to owners	1 July 2009
IFRIC 18*	Transfers of assets from customers	1 July 2009
*Not expected to be relevant to the Group.

• IAS 27, 'Consolidated and separate financial statements' (revised 2008; effective for annual periods beginning on or after 1 July 2009)

The revised standard requires the effects of all transactions with non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss.

• IFRS 3, 'Business combinations' (revised 2008; effective for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009).

The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs should be expensed. The Group will apply the revised standard prospectively to all business combinations from 1 January 2010.

• IFRS 9, 'Financial instruments: Classification and measurement'

In November 2009, the Board issued the first part of IFRS 9 relating to the classification and measurement of financial assets. IFRS 9 will ultimately replace IAS 39. The standard requires an entity to classify its financial assets on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial asset, and subsequently measures the financial assets as either at amortised cost or fair value. The new standard is mandatory for annual periods beginning on or after 1 January 2013.

• 'Improvements to IFRS' (issued in April 2009)

The improvements project contains numerous amendments to IFRS that the IASB considers non-urgent but necessary. 'Improvements to IFRS' comprise amendments that result in accounting changes for presentation, recognition or measurement purposes, as well as terminology or editorial amendments related to a variety of individual IFRS standards. Most of the amendments are effective for annual periods beginning on or after 1 January 2010 respectively, with earlier application permitted. No material changes to accounting policies are expected as a result of these amendments

(d) Early adoption of standards:

In 2009, the Group did not early adopt any new or amended standards and do not plan to early adopt any of the standards issued not yet effective.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Provided it is probable that the economic benefits will flow to the group and the revenue and costs can be measured reliably, revenue is recognised in the income statement as follows: -

Sale of plots

Revenue on sale of plots is recognised as and when all of the following conditions are met:

·; A sale is consummated and contracts are signed;

·; The Group's receivable is not subject to future subordination;

·; The Group has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property; and

·; If acquired on deferred terms, the buyer's investment, to the date of the financial statements, is adequate (at least 25%)

Construction of villas

Revenue on construction of villas is recognised based on percentage of completion as and when the buyer is able to specify the major structural elements of the design of the real estate before construction begins; and/or major structural changes once construction is in progress (whether it exercised that ability or not).

In contrast, if construction could take place independently of the agreement and buyers have only limited ability to influence the design of the real estate (e.g. to select a design from a range of options specified by the entity, or to specify only minor variations to the basic design), the agreement will be for the sale of goods. (see sale of apartments below).

Revenue recognition - continued

Under percentage of completion method contract revenue is recognised over the period of the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Variations in contract work, claims and incentive payments are included in contract revenue to the extent that they have been agreed with the customer and are capable of being reliably measured.

The group uses the 'percentage-of-completion method' to determine the appropriate amount to recognise in a given period. The stage of completion is measured by reference to the contract costs incurred up to the balance sheet date as a percentage of total estimated costs for each contract.

The group presents as an asset the gross amount due from customers for contract work for all contracts in progress for which costs incurred plus recognised profits (less recognised losses) exceed progress billings. Progress billings not yet paid by customers and retention are included within notes receivable. The group presents as a liability the gross amount due to customers for contract work for all contracts in progress for which progress billings exceed costs incurred plus recognised profits (less recognised losses).

Sale of apartments and chalets

Revenue on sale of apartments and chalets are recognized upon delivery.

Interest

Interest income is recognised as the interest accrues using the effective interest method, under which the rate used exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Cost of revenues

Cost of revenues includes the cost of land and development costs. Development costs include the cost of infrastructure and construction. The cost of revenues in respect of apartments and villas is based on the estimated proportion of the development cost incurred to date to the estimated total development costs for each project.

The cost of revenues in respect of land sales is based on the total estimated cost of the land site over the total usable land area in a particular development.

Borrowing cost

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily take a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Development properties

Properties acquired, constructed or in the course of construction for sale are classified as development properties. Development properties are stated at cost plus attributable profit/loss less progress billings or, if lower, net realisable value. The cost of development properties includes the cost of land and other related expenditure, which are capitalised as and when activities that are necessary to get the properties ready for sale are in progress. Net realisable value represents the estimated selling price less costs to be incurred in selling the property.

Income tax

Taxation is provided in accordance with Egyptian fiscal regulations.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on laws that have been enacted at the balance sheet date.

Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation and any impairment in value. Land and projects under construction are not depreciated.

Depreciation is calculated on a straight-line basis using the following depreciation rates:

Buildings	5%
Tools and Equipment	25%
Vehicles	20 - 25%
Furniture and Fixtures	25%

Investment property

Investment property, which is property held to earn rentals and/or for capital appreciation (including property under construction for such purposes), is measured initially at its cost, including transaction costs. Subsequent to initial recognition, investment property is measured at cost less accumulated depreciation and any impairment in value. Land and projects under construction are not depreciated.

Impairment of non- financial assets

Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. Whenever the carrying amount of these assets exceeds their recoverable amount, an impairment loss is recognised in the income statement. The recoverable amount is the higher of an asset's net selling price and the value in use. The net selling price is the amount obtainable from the sale of an asset in an arm's length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

Impairment and uncollectibility of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the income statement. Impairment is determined as follows:

·; For assets carried at fair value, impairment is the difference between cost and fair value, less any impairment loss previously recognised in the income statement;

·; For assets carried at cost, impairment is the difference between carrying value and the present value of future cash flows discounted at the current market rate of return for a similar financial asset;

·; For assets carried at amortised cost, impairment is the difference between carrying amount and the present value of future cash flows discounted at the original effective interest rate.

Financial assets at fair value through profit or loss - Held for trading

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling or repurchasing in the near term. Assets in this category are classified as current assets. Regular waypurchases and sales of financial assets are recognised on the trade-date - the date on which the group commits to purchase or sell the asset. Financial assets carried at fair value through profit or losses are initially recognised at fair value, and transaction costs are expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the income statement within 'other (losses)/income - net' in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the income statement as part of other income when the group's right to receive payments is established.

Accounts receivable

Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

Notes receivable

Notes receivable are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

Prepayments

Prepayments are carried at cost less any accumulated impairment losses.

Intangible assets

Intangible assets acquired separately are reported at cost less accumulated amortisation and accumulated impairment losses. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

Cash and cash equivalents

For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Land purchase liability

Land purchase liability is recognized initially at the fair value. Land purchase liability is subsequently stated at amortized cost using the effective interest method.

When a liability is incurred for the purchase of land. Liability is to be recorded at the fair market value of the land received or at an amount that reasonably approximates the market value of the liability, whichever is more clearly determinable. If the fair value of the land or liability is not determinable, the present value of the liability is determined using a market interest rate to discount all future payments. The Difference between present and face value of the liability, is recorded as a discount and amortized to interest expense using the effective interest method.

Borrowings

Borrowings are recognized initially at the fair value, net of transaction cost incurred. Borrowings are subsequently stated at amortized cost, any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Provisions

Provisions for legal claims are recognized when the group has a present legal or constructive obligations as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

Share capital

Shares are classified as equity when there is no obligation to transfer cash or other assets.

Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Foreign currencies

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Dividends distribution

Dividend distribution to the Group's shareholders is recognized as a liability in the Group's financial statements in the period in which the dividends are approved.

2.4 SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

Judgments

In the process of applying the group's accounting policies, management has made the following judgments, apart from those involving estimations, which have the most significant impact on the amounts recognized in the financial statements.

Revenue recognition

The group has entered into a number of contracts with buyers for the sale of land and villas. Determining whether an agreement for the construction of real estate falls within the scope of IAS 11 or IAS 18 depends on the terms of the agreement and all the surrounding facts and circumstances, and judgment is made with respect to each agreement.

If the contract under consideration meets the definition of a 'construction contract' in IAS 11, then the accounting for the contract is determined in accordance with that Standard. An agreement for the construction of real estate meets the definition of a construction contract when the buyer is able to specify:

• the major structural elements of the design of the real estate before construction begins;

and/or

• major structural changes once construction is in progress (whether it exercises that ability

or not).

Estimation uncertainty

Cost of revenues

The cost of revenues in respect of land sales is based on the total estimated cost of the land site over the total usable land area in a particular development.

Costs to complete the projects

The group uses the percentage-of-completion method in accounting for its fixed-price contracts to construct villas and townhouses. Use of the percentage-of-completion method requires the group to estimate the construction executed to date as a proportion of the total construction to be executed. Were the proportion of construction executed to total construction to be executed to differ by 10% from management's estimates, the amount of revenue recognised in the year would be increased by EGP 13,849,635 if the proportion performed were increased, or would be decreased by EGP 13,849,635 if the proportion performed were decreased.

Income tax

Certain subsidiaries of the group are subject to income tax. Significant estimates are required in determining the provision for income taxes. There are some transactions and calculations for which the ultimate tax determination is uncertain. The group recognizes liabilities for anticipated tax audit issues based on estimates whether additional tax will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

Estimate of fair values of development properties acquired in a business combination

When acquiring subsidiaries whose primary asset is property it is assumed that the difference between the price paid and net tangible assets acquired relates to the value of the property.

3 SALES AND COST OF SALES

	2009	2008
	EGP	EGP
Sales:
Sale of land attributable to villas and town houses	1,033,010,332	1,234,805,955
Revenue from construction contracts	112,784,198	-
	1,145,794,530	1,234,805,955
Cost of sales:
Cost of land attributable to villas and town houses	284,027,307	293,339,733
Cost of land - infrastructure and other cost attributable to villas and town houses	69,912,258	-
Cost of construction contracts	100,580,494	-
	454,520,059	293,339,733

4 SELLING AND ADMINISTRATIVE EXPENSES

	2009	2008
	EGP	EGP

Marketing and selling expenses	49,267,328	78,444,103
Salaries and wages	73,049,385	84,656,584
Professional and governmental fees	14,487,903	6,751,005
Search fees for real estate agents	-	3,750,000
Rent and insurance expenses	5,732,370	3,626,743
Travel	3,551,998	2,695,552
Bank charges	1,517,328	1,383,669
Other expenses	25,406,651	19,831,189
Depreciation expenses	10,001,185	4,965,860
Amortization of intangible asset	5,300,000	5,300,000
	188,314,148	211,404,705

5 INTEREST INCOME

	2009	2008
	EGP	EGP

Interest income - amortization of discount on long term notes receivable	116,265,848	39,141,558
Interest income on time deposits	10,449,832	33,942,909
	126,715,680	73,084,467

6 FINANCE COSTS

	2009	2008
	EGP	EGP

Interest on bank facilities	25,956,351	37,977,130
Interest on land purchase liabilities	63,254,471	70,546,346
	89,210,822	108,523,476

7 OTHER INCOME

	2009	2008
	EGP	EGP

Gain from financial assets at fair value through profit or loss - held for trading	7,390,516	9,237,470
Units transferee charges	5,855,741	11,679,980
Foreign exchange gain	2,776,079	348,009
Other income	3,499,968	3,327,963
	19,522,304	24,593,422

8 INCOME TAX

Income tax consists of:

	2009	2008
	EGP	EGP

Current year	39,901,123	57,595,436
Deferred tax expense arising from the origination and reversal of temporary differences	(9,451)	1,576,577
Charge for the year	39,891,672	59,172,013

The relationship between the tax expense and the accounting profit can be explained as follows:	2009	2008
	EGP	EGP

Accounting profit	559,987,485	719,215,930
Adjustments in determining taxable profit *	(360,481,870)	(431,238,750)
Taxable profit	199,505,615	287,977,180
Statutory income tax rate	20%	20%
Tax expense	39,901,123	57,595,436

* Adjustments in determining taxable profit represent the net result from the non-deductible expenses and the exempted revenue in accordance with Egyptian Tax law as follows:

	2009	2008
	EGP	EGP
Items added to accounting profit :
Depreciation and amortization	15,301,185	10,265,860
Interest on land purchase liabilities	63,254,471	70,546,346
Other non-deductible expenses	1,732,345	2,450,342
Items deducted from accounting profit :
Depreciation and amortization	(36,560,815)	(24,603,355)
Prior years losses	(14,516,983)	(18,453,210)
Interest income - amortization of discount on long term notes receivable	(116,265,848)	(39,141,558)
Exempted revenue	(273,426,225)	(432,303,175)
Net adjustments in determining taxable profit	(360,481,870)	(431,238,750)

Movements in provision during the year

The movement in the current and deferred tax provisions for the year were as follows:

	2009 EGP	2008 EGP	2009 EGP	2008 EGP
	Current tax		Deferred tax
At beginning of the year	57,595,436	31,628,887	2,124,436	547,860
Paid during the year	(57,595,436)	(31,628,887)	-	-
Provided during the year	39,901,123	57,595,436	(9,451)	1,576,576

At end of the year	39,901,123	57,595,436	2,114,985	2,124,436

Tax Status of the Group

The tax situation of the group according to the group's tax advisor opinion was as follows:

The following companies have tax holidays:

Palm Hills Development Company S.A.E, from 1 January 2006 to 31 December 2015 on its revenues derived from its activities.

New Cairo for Real Estate Developments S.A.E, from 13 June 2007 to 31 December 2017 on its revenues derived from its activities.

Gawda for trade services S.A.E, from 1 January 2009 to 11 February 2018 on its revenues derived from its activities.

The following companies submit its tax returns regularly and have not received any notice from the Tax Authority regarding its tax inspection:

Palm Hills Development Company S.A.E

New Cairo for Real Estate Developments S.A.E

Royal Gardens for Real Estate Investment Company S.A.E

Palm Hills Middle East Company for Real Estate Investment S.A.E

Middle East Company for Real Estate and Touristic Investment S.A.E

Middle East for Development and Investment Touristic S.A.E

Gamsha for Tourist Development S.A.E

Nile Palm Al-Naeem for Real Estate Development S.A.E

Rakeen Egypt for Real Estate Investment S.A.E

Al Naeem for the hotels and touristic Villages S.A.E

Gawda for trade services S.A.E

New East Cairo for Real Estate Development S.A.E

City for Real Estate Development S.A.E

Saudi Urban Development company S.A.E received an estimation assessment from the tax authority for the period from inception on 26 November 1998 till 31 December 2000, and the company objected on the assessment during the legal period and the dispute was transferred to the internal committee in order to give the company the right to start an actual inspection based on the company's books.

The company has not received any notice from the Tax Authority regarding its tax inspection for the period from 2001 to 2008.

9 INVESTMENT PROPERTY

	2009	2008
	EGP	EGP

Balance at beginning of year	-	-
Transferred from property and equipment (note 10)	452,029,267	-
Additions through subsequent expenditure	30,679,607	-

Balance at end of year	482,708,874	-

Investment property under construction with a cost of EGP 452,029,267 was transferred from property, and equipment to investment property following the adoption of the amendments to IAS 40 Investment Property resulting from Improvements to IFRSs issued in May 2008 (see note 2.2). No fair value disclosure is provided for property under construction as it cannot be reliably measured.

10 PROPERTY AND EQUIPMENT

2009

	Buildings	Tools & Equipment	Vehicles	Furniture & Fixtures	Construction in progress	Total
	EGP	EGP	EGP	EGP	EGP	EGP
Cost:
At 1 January 2009	15,378,772	49,116,953	11,577,846	31,083,940	452,029,267	559,186,778
Transferred to investment properties (note 9)	-	-	-	-	(452,029,267)	(452,029,267)
Additions	-	9,387,605	1,780,700	15,019,105	-	26,187,410
Disposals	-	-	(161,900)	-	-	(161,900)

At 31 December 2009	15,378,772	58,504,558	13,196,646	46,103,045	-	133,183,021

Depreciation:
At 1 January 2009	1,255,212	6,999,505	2,569,832	5,317,426	-	16,141,975
Depreciation charge for the year	757,500	12,969,530	2,823,954	10,599,530	-	27,150,514
Deprecation related to disposals	-	-	(124,798)	-	-	(124,798)

At 31 December 2009	2,012,712	19,969,035	5,268,988	15,916,956	-	43,167,691

Net carrying amount:
At 31 December 2009	13,366,060	38,535,523	7,927,658	30,186,089	-	90,015,330

10 PROPERTY AND EQUIPMENT - Continued

2008

	Buildings	Tools & Equipment	Vehicles	Furniture & Fixtures	Construction in progress	Total
	EGP	EGP	EGP	EGP	EGP	EGP
Cost:
At 1 January 2008	15,378,772	6,969,015	4,917,551	5,928,489	449,378,102	482,571,929
Additions	-	42,147,938	6,660,295	25,155,451	2,651,165	76,614,849

At 31 December 2008	15,378,772	49,116,953	11,577,846	31,083,940	452,029,267	559,186,778

Depreciation:
At 1 January 2008	497,712	683,039	669,296	720,137	-	2,570,184
Depreciation charge for the year	757,500	6,316,466	1,900,536	4,597,289	-	13,571,791

At 31 December 2008	1,255,212	6,999,505	2,569,832	5,317,426	-	16,141,975

Net carrying amount:
At 31 December 2008	14,123,560	42,117,448	9,008,014	25,766,514	452,029,267	543,044,803

- A building with a net carrying amount of EGP 5,278,750 is collateralized against term loan (note 22).

- Investment property under construction with a cost of EGP 452,029,267 was transferred from property, plant and equipment to investment property following the adoption of the amendments to IAS 40 Investment Property resulting from Improvements to IFRSs issued in May 2008 (see note 2.2).

- There were no impairment charges in 2008 and 2009.

- There were no interest capitalized on property and equipments in 2008 and 2009.

- The depreciation charge has been allocated in the consolidated statement of income as follows:

	2009	2008
	EGP	EGP

Administrative expenses	10,001,185	4,965,860
Development properties	17,149,329	8,605,931
	27,150,514	13,571,791

11 ADVANCE PAYMENTS FOR INVESTMENT ACQUISITION

	2009	2008
	EGP	EGP
Villamora For Real Estate Development Co. S.A.E	24,266,400	17,477,600
Saultan Company - Saudi S.A.E	135,121,743	135,121,743
New Cairo For Development Co. S.A.E	-	48,000
Gamsha For Touristic Development Co. S.A.E.	4,010,000	4,010,000
New East Cairo For Real Estate Development S.A.E	-	285,473,216
Citi For Real Estate Development S.A.E	-	27,294,453
United Group For Real Estate Development S.A.E	1,225,000	1,225,000
Palm October for Hotels S.A.E	62,500	-
	164,685,643	470,650,012

The above mentioned advance payments for investments acquisition represents amounts paid by the company to acquire 65% of Villamora for Real Estate Development Company S.A.E, 51% of Saultan Company - Saudi S.A.E, 49% of United Group For Real Estate Development S.A.E and 98% of Palm October for Hotels S.A.E which were still under incorporation with the legal formalities not being complete as at 31 December 2009. Legal formalities were not completed as at 31 December 2009 for the increase in the Group's share in net assets from 59% to 60% of Gamsha for Touristic Development Company S.A.E.

12 INVESTMENT IN AN ASSOCIATE

Palm Hills Developments Company ('the company') has the following investments in associates:

	Country of Incorporation	Ownership
		2009	2008	2007
Coldwell Banker - Palm Hills for Real Estate Investments - S.A.E	Egypt	49%	49%	49%

- The group's share of aggregated assets and liabilities is as follows:

	2009	2008
	EGP	EGP
Share of associates' balance sheets:
Current assets	143,277	143,277
Non- current assets	117,129	117,129
Current liabilities	(15,406)	(15,406)
Non-current liabilities	-	-
Net assets	245,000	245,00

- The associated company, which is unlisted, did not start its operation as of 31 December 2009.

13 INTANGIBLE ASSETS

The company holds the right of using the trademark of Coldwell Banker. The sub-license agreement has been made on 1 July 2007. The agreement is valid for 10 years starting 1 June 2008 to 1 May 2018.The Company started utilized the right starting 1 January 2008. The agreement for ten years with an amount of EGP 53,000,000 represents EGP 6,000,000 annual payment for the first three years and then EGP 5,000,000 annual payment till the end of the agreement.

	2009	2008
	EGP	EGP
Intangible assets	53,000,000	53,000,000
Accumulated amortization	(10,600,000)	(5,300,000)
Net carrying amount	42,400,000	47,700,000

- The amortization charge has been allocated in the consolidated statement of income as follows:

	2009	2008
	EGP	EGP

Administrative expenses	5,300,000	5,300,000

14 BUSINESS COMBINATIONS

On 1 January 2008, Palm Hills Developments Company S.A.E. ('the company') acquired 99.98% and 60 % of Gawda for Trading Services S.A.E and Al Naeem for Hotels and Touristic Villages S.A.E respectively.

On 1 January 2009 Palm Hills Developments Company S.A.E. ('the company') acquired 51% of City For Real Estate Development S.A.E. The subsidiary contributed revenue of EGP 850,435 and a loss of EGP 90,898 to the Group for the period from date of acquisition to 31 December 2009.

On 20 March 2009, Palm Hills Developments Company S.A.E. ('the company') acquired 59% of New East Cairo For Real Estate Development S.A.E. The subsidiary contributed a profit of EGP 1,177,522 to the Group for the period from date of acquisition to 31 December 2009. If the acquisition had occurred on 1 January 2009 with all other variables held constant, Group revenue for 2009 would have been increase by EGP 1,963,562, and profit for 2009 would have been increased by EGP 1,348,322.

At the date of acquisition City For Real Estate Development S.A.E and New East Cairo For Real Estate Development S.A.E were actively engaged in the construction and development process and marketing of the project. Management determined that the acquired entity should be accounted for as a business in accordance with IFRS 3, "Business Combinations".

The valuation of development properties at the acquisition date was performed by an independent professional appraiser with experience of the relevant market. The valuation of cash and cash equivalents was considered to equal the carrying value representing the entities bank deposits. Carrying values of borrowings and trade and other payable was considered to approximate their fair values.

The assets and liabilities as of the date of acquisition arising from the acquisition are as follows:

		2009				2008
	Fair value recognized on acquisition EGP			Acquirees' carrying amount	Fair value recognized on acquisition		Acquirees' carrying amount
	City For Real Estate Development S.A.E	New East Cairo For Real Estate Development S.A.E	Total EGP	EGP	EGP		EGP
Development properties	9,924,410	446,636,486	456,560,896	280,336,496	129,740,563		55,715,926
Accounts receivable and prepayments	34,853,087	-	34,853,087	34,853,087	2,510,182		2,510,182
Cash and cash equivalents	62,301	20,625,880	20,688,181	20,688,181	1,010,241		1,010,241

Total assets	44,839,798	467,262,366	512,102,164	335,877,764	133,260,986		59,236,349

Land purchase liability	-	(243,247,779)	(243,247,779)	(243,247,779)	(23,859,852)		(23,859,852)
Accounts payable and accruals	(435,032)	(19,109,640)	(19,544,672)	(19,544,672)	(27,824,689)		(27,824,689)
Non-controlling interests	(17,110,313)	(15,631,250)	(32,741,563)	(32,741,563)	(1,051,808)		(1,051,808)

	(17,545,345)	(277,988,669)	(295,534,014)	(295,534,014)	(52,736,349)		(52,736,349)

Net assets acquired	27,294,453	189,273,697	216,568,150	40,343,750	80,524,637		6,500,000
Total purchase consideration	27,294,453	189,273,697	216,568,150	-	80,524,637		-

14 BUSINESS COMBINATIONS - Continued

	2009	2008
	EGP	EGP

Purchase consideration settled in cash	216,568,150	80,524,637
Cash and cash equivalents in subsidiaries acquired	(20,688,181)	(1,010,241)
Cash outflow on acquisition	195,879,969	79,514,396

15 NOTES RECEIVABLE

	2009	2008
	EGP	EGP

Less than one year	1,172,932,278	811,522,045
Unamortized discount	(205,954,825)	(128,435,375)
	966,977,453	683,086,670

More than one year	3,042,832,227	1,971,100,040
Unamortized discount	(541,643,759)	(312,669,844)
	2,501,188,468	1,658,430,196
	3,468,165,921	2,341,516,866

- Although the notes are not rated and generally from individuals, they are secured on the underlying properties and accordingly are thought to be recoverable in full.

16 ACCOUNTS RECEIVABLE AND PREPAYMENTS

	2009	2008
	EGP	EGP

Accounts receivable	357,253,216	169,337,349
Unamortized discount	(18,976,476)	(20,275,675)
	338,276,740	149,061,674
Due from related parties (note 31)	71,939,309	55,880,213
Advance to suppliers	62,682,347	26,441,036
Advance payment for land purchase	3,192,368	2,689,000
Deposits with others	1,172,335	1,987,773
Prepaid expenses	10,856,513	20,260,790
Other receivables	59,059,185	62,450,197
	547,178,797	318,770,683

- The group's accounts receivable did not include past dues or receivables impaired. The management consider receivables to be fully recoverable.

- The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The group does not hold any collateral as security.

17 CASH AND CASH EQUIVALENTS

	2009	2008
	EGP	EGP

Cash at banks	134,924,165	279,025,964
Cash on hand	-	686,869
	134,924,165	279,712,833
Bank overdrafts (note 26)	(145,998,987)	(111,249,739)
Cash and cash equivalents	(11,074,822)	168,463,094

18 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS - HELD FOR TRADING

Represents investments in mutual funds in Egyptian pounds. The fair value is based on their current redemption prices in an active market (Level one in fair value hierarchy) (note 34).

Financial assets at fair value through profit or loss are presented within 'operating activities' as part of changes in working capital in the cash flow statement. Changes in fair values of financial value through profit or loss are recorded in 'other income' in the income statement (note 7).

assets at fair

19 DEVELOPMENT PROPERTIES

	2009	2008
	EGP	EGP

Land acquisition cost - Apartments and chalets lands	4,255,690,885	4,503,236,626
Land acquisition cost - Villas lands	1,534,131,025	751,205,022
Construction cost	68,315,304	-
Cost of construction contracts	(100,580,494)	-
Less Cost of sales	(284,027,307)	(293,339,733)
Land acquisition cost ending balance	5,473,529,413	4,961,101,915
Less cost transferred to project under construction in progress	-	(20,885,467)

	5,473,529,413	4,940,216,448

- At 31 December 2009 development properties with a carrying amount of EGP 5,473,529,413 (2008 EGP 4,940,216,448) are subject to a register debenture to secure the land purchase liability (note 23). According to the land purchase agreement the ownership of the land will not be transferred to the company until the full settlement of the purchase liability.

- The acquired land includes 103 faddans representing land acquired without legal title from the Alreaf Al Orobi amounting to EGP 14,157,941.

- Borrowing cost capitalised on the development properties is EGP 51,996,501 (2008: EGP 33,928,133).

The capitalization rate used to determine the amount of borrowing costs eligible for capitalisation is 12.5%.

20 SHARE CAPITAL

Date	Authorised	No. of shares	Par value	Issued and fully paid (EGP)
Establishment date	350,000,000	1,215,000	100	121,500,000
20 December 2006	350,000,000	3,070,000	100	307,000,000
13 May 2007	1,500,000,000	4,000,000	100	400,000,000
15 May 2007	1,500,000,000	6,000,000	100	600,000,000
6 November 2007	1,500,000,000	8,000,000	100	800,000,000
27 March 2008*	3,500,000,000	416,000,000	2	832,000,000
10 April 2008**	3,500,000,000	465,920,000	2	931,840,000
31 March 2009 **	3,500,000,000	698,880,000	2	1,397,760,000

* On 27 March 2008, Extraordinary General Meeting approved a stock split, increasing the number of Shares outstanding from 8 million to 416 million and decreasing the nominal value of each Share from EGP 100 to EGP 2. Approval of CMA was obtained on that splitting on 17 April 2008.

**On 10 April 2008, the Extraordinary General Meeting approved the Closed Subscription and the issuance of the New Shares by 49,920,000 shares with nominal value of EGP 2 and Share Offer Price of EGP 21.75 with share premium of EGP 985.920,000.

The Company's issued and paid share capital was increased from EGP 832,000,000 to EGP 931.840,000 after the new issuance of shares. The new shares were listed in Cairo Stock exchange on 8 May 2008.

*** On 31 March 2009, the Share Capital was increased from EGP 931,840,000 to EGP 1,397,760,000 based on the Company's General Assembly Meeting approval dated 31 March 2009. The company distributed 232,960,000 share dividends (one share for each two shares). The new shares were listed in Cairo Stock exchange on 18 June 2009.

21 STATUTORY RESERVE

As required by the Egyptian company law and Group's Articles of Association 5% of the net profit for the year has to be transferred to statutory reserve. The Group may resolve to discontinue such annual transfers when the reserve totals 50% of the issued capital.

On 31 March 2009, the Company's General Assembly Meeting approved to transfer an amount of EGP 460,244,353 from share premium to statutory reserve.

22 TERM LOANS

	2009	2008
	EGP	EGP

Less than one year	234,780,818	136,405,712
Between one and five years	354,708,225	379,591,680
	589,489,043	515,997,392

Analysed as follows:

	2009	2008
	EGP	EGP

Loan 1	3,208,272	3,827,070
Loan 2	275,000,000	330,000,000
Loan 3	154,280,000	182,170,322
Loan 4	109,900,000	-
Loan 5	47,100,771	-
	589,489,043	515,997,392

22 TERM LOANS - continued

Loan 1:

The term loan is secured over three floors of Diar Plaza building with net carrying amount of EGP 5,278,750 (note 10). It carries interest at a fixed rate of 14.5% and is repayable on 28 quarterly instalments of EGP 276,000. The instalments due in 2010 are shown as current liability.

Loan 2:

The term loan is a syndicated loan secured over notes receivables and bears an interest of a floating rate of the average corporate deposit rate for 6 months announced from central bank of Egypt plus 2.5% annually.

Loan 3:

The term loan is secured by the assignment of projects' cash flow and bears an interest rate of 2.5% above deposit corridor rate and is repayable on 14 quarterly instalments of EGP 12,860,000. The instalments due in 2010 are shown as a current liability.

Loan 4:

This is a short term loan denominated in US dollars to finance working capital and to fund property acquisition pending arrangement of medium term funding. The loan carries interest rate three months LIBOR plus 0.7%.

Loan 5:

This is a revolving medium term loan amounted to 500 million EGP to be settled with a minimum of 100 million EGP annually in case of full utilisation of the facility with an interest rate 1% plus Libor at the three month rate.

23 LAND PURCHASE LIABILITIES

	2009	2008
	EGP	EGP

Gross land purchase liabilities:
Less than one year	371,236,049	338,715,137
Between one and five years	1,059,120,374	1,849,274,778
	1,430,356,423	2,187,989,915
Unamortized discount	(238,918,267)	(236,864,876)
Present value of land purchase liabilities	1,191,438,156	1,951,125,039

The present value of the land purchase liability is as follows:
Less than one year	319,473,282	298,545,082
Between one and five years	871,964,874	1,652,579,957
	1,191,438,156	1,951,125,039

- Land purchase liability is secured over development properties with a carrying amount of EGP 5,473,529,413 (2008 EGP 4,940,216,448) (note 19). According to the land purchase agreement the ownership of the land will not be transferred to the company until the full settlement of the purchase liability.

- The effective interest rate used on land purchase liabilities is 10%.

24 NOTES PAYABLE

	2009	2008
	EGP	EGP

Less than one year - Others	174,288,490	-
Less than one year - Land	334,702,059	262,893,477
Unamortized discount	(108,718,990)	(1,680,573)
	400,271,559	261,212,904

More than one year - Others	130,588,308	-
More than one year - Land	2,653,896,265	1,639,724,047
Unamortized discount	(836,861,735)	(467,543,659)
	1,947,622,838	1,172,180,388
	2,347,894,397	1,433,393,292

25 OTHER NON - CURRENT LIABILITIES

Those comprise deposits received from units' owners to finance the maintenance, security, and other running expenses related to Palm Hills compound management.

26 BANK OVERDRAFTS

Bank overdrafts are secured by personal guarantees of the chairman of Palm Hills Development Company S.A.E., and bear market interest rates.

27 ACCOUNTS PAYABLE AND ACCRUALS

	2009	2008
	EGP	EGP

Due to related parties (note 31)	56,052,997	56,543,163
Suppliers - contractors	21,178,370	94,625,546
Suppliers - property and equipment	1,518,750	-
Tax authority - withholding tax	3,375,305	2,171,116
Tax authority - Others	9,890,277	5,833,019
Customers credit balances	23,627,459	42,542,442
Accrued expenses	8,959,681	4,390,546
Social Insurance Authority	11,906,987	6,644,468
Advances from customers - club subscriptions	46,907,690	41,424,528
Other payables	69,802,998	53,633,761
	253,220,514	307,808,589

- Customer credit balances represent customers' payment for un contracted units (still in process) and unidentified client payment till settled subsequently to customers accounts.

28 ADVANCES FROM CUSTOMERS

	2009	2008
	EGP	EGP

CASCADE Palm - Sixth Phase	12,090,940	12,090,940
Golden Areca Palm - Eighth Phase	-	3,354,110
Al Golf customers	83,325,406	205,768,283
Al Katamaya customers	2,697,080	4,568,184
BAMBOO customers	1,284,429	5,178,495
New Cairo Company for Real Estate Development S.A.E customers	1,194,921	2,594,500
Rakeen phase (A-B-C-D)	8,052,269	43,471,487
Royal Garden customers	80,293,425	86,399,831
Palm Hills Middle East customers	25,387,149	47,601,031
Al Naeem for Hotels customers	22,723,942	95,669,568
Saudi for urban development customers	14,322,405	25,475,705
Palm Hills Development customers	30,589,900	-
City for real estate development customers	5,267,256	-
Eastern New Cairo for real estate development customers	32,955,110	-
Middle East for real estate & touristic development customers	7,924,397	-
	328,108,629	532,172,134

29 BILLINGS IN EXCESS OF COSTS

	2009	2008
	EGP	EGP
Construction cost to date	1,433,550,531	751,205,022
Add attributable profit	12,203,704	-
Less progress billings	(3,415,652,994)	(1,987,954,054)
Billings in excess of costs and estimated earnings on uncompleted contracts	1,969,898,759	1,236,749,032

30 EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

	2009	2008
	EGP	EGP
Net profit attributable to ordinary equity holders of the parent	475,595,463	657,678,480
Weighted average number of ordinary shares outstanding during the year	698,880,000	665,920,000
	0.68	0.99

- No figure for dilutive earnings per share has been given as the company has not issued any instruments that might be potentially dilutive.

31 RELATED PARTY TRANSACTIONS

The following are the details of major related party transactions during the year and the related balances at the year end:

Related party	Nature of transaction	Amount of transaction			Balance
			2009	2008	2009	2008
			EGP	EGP	EGP	EGP

Affiliates	Current account - payable		669,659	9,921,972	(882,157)	(212,498)
	Current accounts - receivable		14,282,180	-	22,262,578	7,980,398
	Investment acquisitions		163,398,143	517,027,832	-	-

Directors and senior management	Sale of villas and town houses		59,057,894	55,532,207	-	-
	Management compensation		889,204	5,504,681	-	-

Shareholders	Current accounts - receivable		10,835,109	6,605,760	49,676,731	9,058,193
	Current account - payable		(3,492,057)	-	(10,914,094)	(12,073,919)
	Payments for capital increase		-	990,378,204	-	38,841,622
	Creditors investments acquisitions *			-	(44,256,746)	(44,256,746)

			Due from related parties (note 16)		71,939,309	55,880,213
			Due to related parties (note 27)		(56,052,997)	(56,543,163)

* Creditors investment acquisition represents payments by the shareholders of Palm Hills Developments Company ("the Company") on its behalf to finance the acquisition of Saudi Urban Developments Company S.A.E.

32 RISK MANAGEMENT

The group's activities expose it to a variety of financial risks; price risks, credit risk, liquidity risk and interest rate risk.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies and evaluates financial risks in close co-operation with the company's operating units. The Board provides written principles for overall risk management as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of non derivative financial instruments and investing excess liquidity.

Market risk

Foreign exchange risk

The group operates locally and therefore is not exposed to significant foreign exchange that might arise from various currency exposures.

Price risk

The group is exposed to property price risk. Factors that apply generally to the real estate development industry, many of which are macroeconomic in nature and beyond the control of Palm Hills, may affect the economic performance and value of Palm Hills' properties, some of which may include:

- National, regional and local economic climate;

- cyclical nature of the real estate market;

- oversupply of similar properties or a reduction in demand for the properties;

- changes in interest rates and inflation and the limited availability of financing;

- governmental laws, rules and regulations, including in relation to financing, environmental usage, tax and insurance; and

- acts of nature that may damage the properties.

Any negative change in one or more of these general factors listed above, as well as in the factors described in further detail below, could adversely affect Palm Hills' business, results of operations and financial condition.

Credit risk

The group has no significant concentration of credit risk. It has policies to ensure that contracts are made with customers with an appropriate credit history. Cash transactions are limited to high-credit-quality financial institutions. The group has policies that limit the amount of credit exposure to any financial institution. The Company sells its products to a large number of customers. Its 5 largest customers account for 3% of outstanding accounts receivable at 31 December 2009 amounting to EGP 124,769,668 (2008: 10%). The Group's exposure to credit risk is not materially different from the carrying amounts of its financial assets.

Liquidity risk

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool.

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. The Group's policy is that not more than 55% of borrowings should mature in the next 12 month period. 51.8% of the Group's debt will mature in less than one year at 31 December 2009 (2008: 39.5%) based on the carrying value of borrowings reflected in the financial statements.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments.

32 RISK MANAGEMENT - continued

2009
Year ended 31 December 2009
	On Demand	Less than 3 Months	3 to 12 months	1 to 5 years	More than 5 years	Total
	EGP	EGP	EGP	EGP	EGP	EGP
Accounts payables	21,178,370	25,172,569	206,869,566	-	-	253,220,505
Income tax payable	-	-	39,901,123	-	-	39,901,123
Bank overdrafts	-	-	145,998,987	-	-	145,998,987
Term loans and interest	-	93,491,330	280,473,988	421,984,225	-	795,949,543
Notes payable - Others	-	-	174,288,490	125,688,308	4,900,000	304,876,798
Notes payable - Lands	-	-	334,702,059	2,203,252,613	450,643,652	2,988,598,324
Land purchase liabilities	-	-	371,236,050	565,234,840	493.885.533	1,430,356,423
Total	21,178,370	118,663,899	1,553,470,263	3,316,159,986	949,429,185	5,958,901,703

2008
Year ended 31 December 2008
	On Demand	Less than 3 Months	3 to 12 months	1 to 5 years	More than 5 years	Total
	EGP	EGP	EGP	EGP	EGP	EGP
Accounts payables	30,962,611	36,802,098	302,441,683	-	-	370,206,392
Bank overdrafts	-	-	111,249,739	-	-	111,249,739
Term loans and interests	-	52,415,178	157,245,534	450,867,680	-	660,528,392
Notes payable - Lands	-	-	262,893,477	1,321,643,179	318,080,869	1,902,617,525
Land purchase liabilities	-	-	338,715,137	1,499,690,353	349,584,425	2,187,989,915
Total	30,962,611	89,217,276	1,172,545,570	3,272,201,212	667,665,294	5,232,591,963

Interest rate risk management

The Group is exposed to interest rate risk because entities in the Group borrow funds at floating interest rates. The risk is managed by the Group by monitoring the interest risk and assesses the possible change in interest rates.

The Group's exposures to interest rates on financial liabilities are detailed in the liquidity risk management section of this note.

Interest rate sensitivity analysis

The sensitivity analyses below have been determined based on the exposure to interest rates for non-derivative instruments at the end of the reporting period. For floating rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management's assessment of the reasonably possible change in interest rates.

If interest rates had been 50 basis points higher/lower and all other variables were held constant, the Group's profit for the year ended 31 December 2009 would decrease/increase by EGP 4,089,723 (2008: decrease/increase by EGP 4,793,217). This is mainly attributable to the Group's exposure to interest rates on its variable rate borrowings.

The Group's sensitivity to interest rates has decreased during the current period mainly due to the reduction in the interest rate of debt instruments.

Capital Management

The primary objective of the group's capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximize shareholder value.

The Company manages its capital structure and makes adjustments to it in light of changes in business conditions. No changes were made in the objectives, policies or processes during the years ended 31 December 2008, 31 December 2007 and 2006. Capital comprises share capital, retained earnings, statutory reserve and non-controlling interests, and is measured at EGP 3,410,358,997 as at 31 December 2009 (2008: EGP 2,832,200,420)

33 CAPITAL COMMITMENTS

Estimated capital expenditure contracted for at the balance sheet date but not provided for represent the following:

	2009 EGP	2008 EGP

Capital Increase in subsidiaries	-	-
Land acquisition	-	261,003.188
	-	261,003,188

34 FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value of financial instruments

Fair value of financial instruments carried at amortised cost

The directors consider that the carrying amounts of financial assets and financial liabilities recognized at amortized cost in the financial statements approximate their fair values.

Valuation techniques and assumptions applied for the purposes of measuring fair value

The fair values of financial assets and financial liabilities are determined as follows.

·; The fair values of financial assets and financial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes).

·; The fair values of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

·; The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash flow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.

Fair value measurements recognized in the balance sheet
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. ·; Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. ·; Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). ·; Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).
	2009
	Level 1	Level 2	Level 3	Total
	EGP	EGP	EGP	EGP

Financial assets at FVTPL
Non-derivative financial assets held for trading	127,631,947	-	-	127,631,947

Total	127,631,947	-	-	127,631,947

There were no transfers between Level 1 and 2 in the period.

35 GROUP ENTITIES

	2009	2008
Subsidiaries:	%	%
New Cairo for Real Estate Developments S.A.E	99.99%	99.87%
Royal Gardens for Real Estate Investment Company S.A.E	51%	51%
Palm Hills Middle East Company for Real Estate Investment S.A.E and its subsidiary, Middle East Company for Real Estate and Touristic Investment S.A.E	99.95% 87.5%	99.95% 87.5%
Middle East for Development and Investment Touristic S.A.E	58.75%	58.75%
Gamsha for Tourist Development S.A.E	60%	59%
Nile Palm Al-Naeem for Real Estate Development S.A.E	51%	51%
Saudi Urban Development Company S.A.E	51%	51%
Rakeen Egypt for Real Estate Investment S.A.E	99.95%	97%
Al Naeem for the hotels and touristic Villages SAE	60%	60%
Gawda for trade services SAE	100%	99.98%
New East Cairo for Real Estate Development. SAE	59%	89%
City for Real Estate Development SAE	51%	51%

Associate:
Coldwell Banker - Palm Hills for Real Estate Investments - S.A.E	49%	49%

Advance payments for investments acquisition
Saultan Company - Saudi SAE	51%	51%
Villamora for Real Estate Development Company SAE	65%	65%
United Group for Real Estate Development SAE	49%	49%
Palm October for Hotels S.A.E.	98%	-

36 RESTATEMENT

Certain comparative figures for the year 2008 have been restated due to an error in the calculation of non-controlling interests in profit for the year 2007.

	Comparative	Adjustment	Restated comparative	Nature of prior year adjustments
Non-controlling interests	103,457,918	213,538	103,671,456	Correction of an error
Retained earnings	225,911,021	(213,538)	225,697,483	Correction of an error

- The impact of this restatement on opening balances in 2008 is not material, so no opening statement of financial position has been presented.

37 COMPARATIVE FIGURES

Certain comparative figures for the year 2008 have been reclassified to conform with the current year's presentation as follows:

	Comparative	Reclassification	Amended balance
Advance payments for investment acquisition	470,675,012	(25,000)	470,650,012
Accounts receivable and prepayments	318,745,683	25,000	318,770,683
Advance from customers	573,596,662	(41,424,528)	532,172,134
Accounts payable and accruals	266,384,061	41,424,528	307,808,589

- The impact of this reclassification on opening balances in 2008 is not material, so no opening statement of financial position has been presented.

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR UAVURRSAORAR

Date		Source	Headline
17th Dec 2020	5:30 pm	RNS	Palm Hills Development SAE GDR
30th Nov 2020	7:00 am	RNS	Agreement
16th Nov 2020	3:43 pm	RNS	Acquisition
16th Nov 2020	1:29 pm	RNS	3rd Quarter Results
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28th Sep 2020	4:36 pm	RNS	Intention to Cancel Listing and Terminate GDRs
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1st Sep 2020	9:00 am	RNS	Notice of Results
19th Aug 2020	1:30 pm	RNS	GM Statement
27th Jul 2020	1:57 pm	RNS	Notice to Shareholders
14th Jul 2020	11:39 am	RNS	Acquisition
29th Jun 2020	7:00 am	RNS	1st Quarter Results
29th Jun 2020	7:00 am	RNS	PHD inked an MOU to establish university in Badya
25th Jun 2020	8:53 am	RNS	New Financing Agreement
8th Jun 2020	8:37 am	RNS	Agreement
16th Apr 2020	9:10 am	RNS	PHD to host its EGM&OGM via a Conference Call
14th Apr 2020	7:00 am	RNS	Press Release
1st Apr 2020	9:01 am	RNS	AGM Statement
23rd Mar 2020	5:07 pm	RNS	AGM Statement
23rd Mar 2020	7:00 am	RNS	Notice of GM
6th Mar 2020	7:00 am	RNS	Notice to Shareholders
25th Feb 2020	7:56 am	RNS	PHD 4Q19
21st Jan 2020	1:54 pm	RNS	PHD inks EGP505mn loan to refinance existing debt
18th Dec 2019	10:49 am	RNS	PHD ink EGP1.1 billion refinance medium-term loan
18th Nov 2019	7:00 am	RNS	3rd Quarter Results
22nd Oct 2019	9:15 am	RNS	PHD fourth securitization transaction
11th Sep 2019	9:26 am	RNS	PHD inks service agreement with JBI
6th Sep 2019	12:33 pm	RNS	Management Change
6th Sep 2019	12:22 pm	RNS	Director Declaration
4th Sep 2019	8:25 am	RNS	Palm Hills Developments-1H2019
11th Jun 2019	8:51 am	RNS	1st Quarter Results
25th Mar 2019	7:00 am	RNS	Agreement
6th Mar 2019	1:38 pm	RNS	Agreement
27th Feb 2019	8:03 am	RNS	Annual Financial Report
3rd Dec 2018	7:36 am	RNS	Announcement re: Rights Issue
22nd Nov 2018	2:54 pm	RNS	Announcement re: Rights Issue
22nd Nov 2018	7:33 am	RNS	3rd Quarter Results
19th Nov 2018	9:04 am	RNS	PHD raise Gross Proceeds of EGP1.26 billion
3rd Oct 2018	2:23 pm	RNS	PHD closes discounting transaction of EGP316 mn
27th Sep 2018	8:32 am	RNS	Public subscription notice
13th Aug 2018	9:27 am	RNS	London Stock Exchange Notice
1st Aug 2018	8:52 am	RNS	Palm Hills Developments 2Q2018 Earnings Release
17th Jul 2018	2:34 pm	RNS	PHD announces the resignation of Timothy Collins
15th May 2018	9:19 am	RNS	1st Quarter Results
3rd May 2018	8:09 am	RNS	PHD and Sarwa Capital closed EGP261 Mn Bonds
19th Apr 2018	10:39 am	RNS	Palm Hills Developments to hold EGM on 13/5/2018
5th Mar 2018	7:00 am	RNS	Notice of GM
27th Feb 2018	1:22 pm	RNS	re (the resignation of Architect Shehab Mazhar)
26th Feb 2018	8:11 am	RNS	Annual Financial Report
2nd Nov 2017	7:55 am	RNS	3rd Quarter Results

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