1 Aug 2018 08:52
PHD achieved record New Sales of EGP7.8 billion in 1H2018, following Badya's successful launch, coupled with 10pp YoY growth in Gross Profit margin to 39% and 26% YoY increase in Net Profit after Tax & Minority Interest reaching EGP440 million
Cairo/London (August 1, 2018) - Palm Hills Developments S.A.E. ("PHD" or "the Company") (EGX: PHDC.CA, PHDC.LI), a leading real estate developer in Egypt, announced its consolidated financial and operating results for the financial period ended June 30, 2018.
Key Highlights
§ The Company has successfully launched its largest integrated development "Badya" spreading across 3,000 feddan (12.6 million sqm) in West Cairo. The first mini phase (1A) encompasses 2,688 units. New Sales in Badya recorded EGP3.7 billion (1,558 units) in 2 months during 2Q2018, a strong testament to PHD's brand equity and strong sales capabilities.
§ As part of its strategy to focus on growth and profitability, margins continued to improve across the board during 1H2018 while maintaining the quality PHD is known for. Gross Profit margin reached 39% (+10pp YoY) in 1H2018 and 40% (+12pp YoY) in 2Q2018, alongside 43% YoY growth in EBITDA reaching EGP902 million, an EBITDA margin of 27% (+8pp YoY). Net Profit margin reached 13% (+2pp).
§ In May 2018, PHD successfully concluded a securitization of receivables transaction with net proceeds of EGP261 million, for receivables portfolio relating to 232 delivered units in the following projects: Palm Hills Katameya Extension, Palm Parks and Hacienda White 2. PHD expects to conclude another securitization transaction during 2H2018, in line with its deleveraging plans, for receivables portfolio amounting to c.EGP450-470 million relating to 463 units in Hacienda Bay.
§ On July 31, 2018, the Company's Board of Directors approved increasing issued capital by EGP1.54 billion via tradable rights issue at par value. The rights issue proceeds will allow PHD to continue its stellar performance with the funds being mainly allocated towards the development of Badya's infrastructure component following its successful launch.
1H2018 Highlights
§ New Sales (Residential and Commercial) recorded a growth of 29% YoY to reach EGP7.8 billion, up from EGP6.0 billion in 1H2017. The said growth was mostly driven by strong demand for launched units in Badya, alongside demand for residential units in Palm Hills New Cairo, the sale of PK2 Mall in East Cairo as well as commercial units in VGK Mall, The Lane Mall, and Palm Hills Medical Clinics.
§ Cash Inflows from Operations amounted to EGP2.9 billion, representing a growth of 26% YoY. Construction earned value stood at EGP0.9 billion.
§ Profitability margins witnessed a solid improvement with Gross Profit registering an increase of 39% YoY to reach EGP1.3 billion, a 10pp YoY enhancement in margin to 39%. While EBITDA grew 43% YoY to EGP902 million, with 8pp YoY enhancement in margin to 27%.
§ Net Profit after Tax and Minority Interest grew 26% YoY to reach EGP440 million, translating into a net profit margin of 13%, mostly due to trickledown effect in profitability margins.
§ The Company delivered 728 units, on schedule to meet 2018 handover target of 1,500 units.
2Q2018 Highlights
§ Revenue grew 16% YoY to reach EGP1.9 billion, boosted by handovers of high value units.
§ Gross Profit grew 67% YoY to reach EGP764 million, translating into a gross profit margin of 40%. EBITDA witnessed formidable growth of 71% YoY to stand at EGP521 million, translating into an EBITDA margin of 27%. Growth in Gross Profit and EBITDA trickled down to Net profit after Tax & Minority Interest which increased 57% YoY to EGP216 million. Notably, earnings for the quarter were negatively impacted by a one-off financial charge of EGP85 million relating to the securitization of receivables transaction concluded in May 2018.
Yasseen Mansour, Chairman Comments:
I am very pleased to share with you our second quarter 2018 financial results, another strong quarter for the Company in terms of New Sales, profitability and handovers, backed by healthy demand for our recently launched mini-city Badya, the continued accelerated pace of construction, complimented by our management team.
During 1H2018, we witnessed healthy growth in New Sales of 29% YoY recording EGP7.8 billion, fueled by the launch of Badya in West Cairo. In May 2018, we launched the first mini phase of Badya offering 2,688 units (709 standalone units and 1,979 apartments). By end of the quarter, New Sales in the project amounted to EGP3.7 billion, a testimony for the ongoing demand for quality offerings by our Company despite the challenging property market conditions. New Sales during the second quarter of 2018 was also supported by the continued demand for residential offerings in Palm Hills New Cairo, which accounted for EGP1.4 billion.
Looking at our commercial real estate portfolio, demand for our commercial proposition remained strong as we sold 51 commercial units worth EGP0.4 billion, mainly in The Lane, VGK Mall and Palm Hills Medical Clinics, coupled with the sale of PK2 Mall in East Cairo for EGP720 million.
During 1H2018, our recurring income portfolio contributed 15% to Net Profit, driven by partial recovery in tourism with room occupancies improving in the Company's three operating hotels, coupled with profitable growth in Palm Club's operations.
Despite the challenging market conditions, we believe that we are still gaining market share with 2,242 units sold during 1H2018. We handed over 728 homes during such period, spent EGP0.9 billion on construction and generated cash inflows from operations of EGP2.9 billion.
Our financial results continued to reflect our operational excellence in 1H2018 with Revenue of EGP3.4 billion, Gross Profit margin of 39%, EBITDA margin of 27%, Net Profit after Tax & Minority Interest of EGP440 million and Net Profit margin of 13%, as we continue to focus on improving our ROE. Our Balance Sheet maintained its strong position with receivables of EGP16.8 billion, covering Net Debt 5.2 times.
We remain committed to deleverage our Balance Sheet via the securitization of receivables program, as we completed a securitization of receivables transaction in May 2018 and received net proceeds of EGP261 million in relation to handed over units in Palm Hills Katameya Extension, Palm Parks and Hacienda White 2. We expect to conclude another securitization transaction of receivables portfolio worth c.EGP450-470 million relating to 463 delivered units in Hacienda Bay during 2H2018.
With regards to new land acquisitions, we are the highest bidders for a prime land plot strategically located adjacent to 26th of July Corridor in West Cairo, and expect to be awarded soon. The plot will be developed into a mixed-use complex. The Company expects to sign the definitive agreement during 2H2018, based on an SPV between PHD, Al Shark and Al Badr (Developers of the renowned Akran mixed use complex in West Cairo) and NUCA.
On July 31, 2018, the Company's Board of Directors approved increasing issued capital by EGP1.54 billion via tradable rights issue at par value. The rights issue proceeds will be mainly allocated towards the development of Badya's infrastructure component following its successful launch, alongside the development of the commercial component of Palm Hills New Cairo, accelerating construction works in The Crown and seed capital for the 205 feddan plot. The Company will announce further details post concluding related regulatory and shareholders approvals.
Financial Review
In 1H2018, Revenue grew by a modest 4% YoY to EGP3.4 billion, on the back of handing overs high margin units in Palm Parks, Hacienda Bay, and Golf Extension.
Despite the modest growth in top line, Gross Profit witnessed strong YoY growth of 39% reaching EGP1.3 billion in 1H2018, a 10pp margin enhancement to 39%. Improvement in gross margin was primarily due to the handover of high margin units and New Sales of standalone units in Palm Hills New Cairo, Phase 2 of Palm Hills Katamya, Golf Extension, Woodville and Golf Views coupled with lower YoY contribution from old projects as such projects are almost completed. EBITDA grew 43% YoY to EGP902 million, with an EBITDA margin of 27%. Net Profit after Tax and Minority Interest grew 26% YoY to reach EGP440 million, translating into a net margin of 13%, mostly due to trickledown effect in profitability margins.
Revenue for the quarter increased 16% YoY to record EGP1.9 billion compared to EGP1.6 billion, boosted by deliveries in Palm Parks, Hacienda White and Golf Extension, coupled with the positive impact of units sold in Palm Hills New Cairo and Badya. Gross profit jumped 67% to EGP764 million, translating into a record gross profit margin of 40%. EBITDA witnessed a formidable growth of 71% YoY recording EGP521 million, translating into a margin of 27%. Growth in Gross Profit and EBITDA trickled down to Net profit after Tax & Minority Interest, which increased 57% YoY to EGP216 million in 2Q2018. Notably, earnings for the quarter were negatively impacted by a one-off financial charge of EGP85 million relating to the securitization of receivables transaction concluded in May 2018.
Net Debt/EBITDA decreased to 1.8x, compared to 2.8x in 1H2017. By the end of 1H2018, Receivables stood at EGP16.8 billion, up from EGP15.3 billion by end of FY2017, covering Net Debt by 5.2 times.
Operational Review
Impressive Sales Performance driven by strong demand for residential units in Badya
New Sales for 1H2018 reached EGP7.8 billion, a growth of 29% YoY, of which EGP6.7 billion were generated by residential sales and EGP1.1 billion by the sale of commercial units. Growth in residential sales was mostly driven by the strong uptake of recently launched units in Badya, PHD's 3000 feddan (12.6 million sqm) integrated development. Badya accounted for c.47% of New Sales in 1H2018, coupled with robust demand for Palm Hills New Cairo units.
In 1H2018, the number of units sold increased 66% YoY to 2,242 units (including 1,558 units in Badya), compared to 1,353 units sold in 1H2017.
During 2Q2018, New Sales more than doubled to mark c.EGP5 billion. Residential sales grew 118% and recorded EGP4.8 billion, while Commercial Sales accounted for the balance.
In West Cairo, New Sales recorded EGP4.9 billion, of which residential sales contributed EGP4.6 billion, mainly driven by Badya which booked EGP3.7 billion since its launch in May 2018, coupled with demand for commercial units in The Lane and Palm Hills Medical Clinics with New Sales of EGP201 million and EGP62 million respectively.
In East Cairo, New Sales decreased 16% YoY to reach EGP2.7 billion in 1H2018, because of comparing with a high base since the previous reporting period witnessed remarkable demand for offerings in Palm Hills New Cairo, following its successful launch by end of FY2016. The Company sold commercial units worth EGP120 million in VGK Mall, and sold PK2 Mall through a bulk deal to Mobco Real Estate Company during 2Q2018.
In the North Coast, New Sales stood at EGP164 million during 1H2018, a drop of 83% YoY, due to seasonality in demand for secondary homes sales, which is expected to rebound during 3Q2018.
The Company handed over 728 units during 1H2018, ahead of the schedule to deliver 1,500 units by the end of 2018. Construction activities for 1H2018 are progressing on schedule with an earned value of EGP0.9 billion.
Recurring income portfolio from three hotels and commercial real estate segment contributed 15% to Net Profits. The number of memberships in Palm Club stood at 2,970 memberships by end of 1H2018.
Outlook
During 2H2018, we will continue to implement our accelerated construction program with the aim of increasing handovers and completing several projects currently under development.
With the completion of the existing projects, the Company will be more focused towards its new developments namely Badya, Palm Hills New Cairo, The Crown, Capital Gardens and the 205 feddan project, which is expected to be awarded soon.
The Company expects to monetize receivables of up to c.EGP450-470 million during 2H2018, in line with the planned securitization of receivables program, with a strategic objective of deleveraging the Balance Sheet.
With regards to commercial developments, the Company is expected to launch Hacienda Bay commercial and Golf Extension's office park during 2H2018.