PHDC.L Regulatory News (PHDC)

Cairo/London (August 9, 2016) - Palm Hills Developments S.A.E. ("PHD" or "the Company") (EGX: PHDC.CA, PHDC.LI), a leading real estate developer in Egypt, announce its consolidated financial and operating results for the financial period ended June 30, 2016.

Key Highlights

§ SWA Group finalized the master plan of 500 feddan co-development project with NUCA, which is due for launch during 4Q2016. The project will encompass 4,947 units and 100 feddan allocated for commercial developments.

§ In Capital Gardens, cumulative New Sales recorded EGP1.1 billion since the project's launch in December 2015. Construction activities are expected to commence in September 2016.

§ In Palm Valley, cumulative New Sales stood at EGP788 million, following the successful launch in mid-March 2016, a strong evidence of the sustainable and growing demand for the Company's product offerings. Construction works already started.

1H2016

§ New Sales stood at EGP3.4 billion, an increase of 32% YoY, driven by the strong demand for housing across all regions.

§ During 1H2016, the number of delivered units increased 36% YoY to 825 units, as opposed to 607 units for the same period last year.

§ Under the previous accounting method, Revenue increased 54% YoY to reach EGP2.3 billion. Despite the changes in accounting standards, Revenue increased 45% to EGP2.1 billion, driven by a stronger pace of unit deliveries, accelerated construction activities and healthy sales momentum.

§ Under the previous accounting method, EBITDA added 14% YoY to reach EGP524 million. Under the current accounting method, EBITDA decreased 19% YoY to EGP333 million.

§ Under the previous accounting method and after normalizing 1H2015 figure, Net Profit before Tax & Minority Interest* increased 47% YoY to reach EGP529 million. Under the current accounting method, Net Profit before Tax & Minority Interest* increased 8% YoY to EGP338 million.

§ Under the previous accounting method and after normalizing 1H2015 figure, Net Profit after Tax & Minority Interest* stood at EGP290 million, a decrease of 9% YoY. Under the current accounting method, Net Profit after Tax & Minority Interest* decreased 38% YoY to EGP169 million. The decrease in Net Profit after Tax & Minority Interest was driven by the Company's tax exemption expiring on December 31, 2015, coupled with higher Minority Interest YoY as a result of higher recognized revenue from Village Gate, Palm Valley & CASA, which the Company owns 51% and 60% respectively.

2Q2016

§ New Sales for the quarter stood at par with 2Q2015 and recorded EGP1.2 billion, despite the negative impact of the holy month of Ramadan.

§ During the quarter, the Company handed over 447 units, a growth of 27% YoY.

§ Under the previous accounting method, Revenue increased by a remarkable 60% YoY to EGP1.2 billion. Under the current accounting method, Revenue grew 46% YoY to reach EGP1.1 billion.

§ Under the previous accounting method, EBITDA stood at EGP247 million, a growth of 19% YoY. Under the current accounting method, EBITDA decreased 25% YoY to reach EGP143 million. The reasons behind the YoY decline under the current accounting method are as follows:

§ Adopting the current accounting method and therefore unable to record the sale of land for standalone units in full as Revenue.

§ The Company adopts a first sold first delivered policy of delivering units and this quarter we continued to deliver units sold post the Arab Spring which were contracted at depressed prices and suffered a delayed delivery;

§ Change in mix/type of units delivered during 2Q2016 which include 328 apartments and 119 standalone units.

§ Under the previous accounting method, and after normalizing 2Q2015 figure, Net Profit before Tax & Minority Interest* recorded a growth of 76% YoY reaching EGP247 million. Applying the same methodology to Net Profit before Tax & Minority Interest* under the current accounting method, it recorded EGP143 million, a growth of 17% YoY.

§ Under the previous accounting method, Net Profit after Tax & Minority Interest* lost 6% YoY and amounted to EGP99 million. Applying the new accounting method, Net Profit after Tax & Minority Interest* stood at EGP64 million.

 * For illustrative purposes, Net Profit figures of 1H2015 & 2Q2015 were normalized by adding back provisions of EGP100 million and deducting EGP426 million of capital gain on the sale of non-core land bank in the North Coast and Alexandria.

Yasseen Mansour, Chairman Comments:

I am very pleased to share with you our first half 2016 financial results, another record period for the Company in terms of New Sales and handovers, driven by healthy market conditions, accelerated construction works, backed by strong management team and a solid financial position.

Our New Sales for the first half of 2016 recorded EGP3.4 billion, a growth of 32% YoY, driven by the strong demand for housing across all regions. We are currently witnessing a strong momentum in terms of New Sales in our North Coast projects, and expect to demonstrate strong growth in New Sales during the third quarter of 2016. Although Hacienda West's master plan has been finalized, we opted to postpone the project's launch to focus on the existing North Coast projects and expect to launch the project in 1Q2017.

We continue to witness strong execution and units' handover within our residential projects, with the bulk of construction activities in West Cairo and North Coast. During the first half of 2016, the Company handed over 825 homes, a growth of 36% over the same period last year. Furthermore, the Company spent EGP1.1 billion on construction and collected EGP1.3 billion from Receivables and New Sales, a growth of 13% YoY.

The Balance Sheet maintained a strong position with Total Equity (without any revaluation of land bank) of EGP6.2 billion, Receivables of EGP9 billion, supported by the growth in New Sales. Net Debt stood at EGP2.4 billion. The Company is in process of deleveraging the Balance Sheet via monetizing receivables of up to c.EGP2.5 billion over 2-3 years period, including a securitized bond issuance by up to EGP1 billion. The first transaction is foreseen to close during the last quarter of 2016 for a total of EGP350-400 million in receivables relating to delivered units in some of our projects.

Since the beginning of the year, the Company adopted the mandatory changes to revenue recognition policies as per the revised Egyptian Accounting Standards. While the new regime adversely affected our 2Q2016 financial results, we expect it to boost our results going forward as the new standards will result in more balanced revenue recognition especially with regards to standalone units. The current accounting standards didn't reduce our profits, but merely deferred it, as we control our profitability internally to meet our targets, not having in mind the accounting standards being applied.

With regards to our recurring income and commercial real estate portfolio, the segment contributed 14% to Net Profits, in line with our strategy to achieve 25% in Net Profits from recurring income by FY2020. Following the launch of units sale in VGK Mall, we successfully secured sales worth EGP226 million. The number of memberships exceeded the 2,200 mark in Palm Club. Management is currently considering an additional office building in Golf Views.

We remain on track to launch sales in the 500 feddan co-development project with NUCA during 4Q2016. SWA Group has finalized the master plan during this quarter. We expect to reach a definitive agreement with NUCA on the co-development of 6,000 feddan project of West Cairo prior to end of this year. Given the strong market conditions, we remain on track to achieve our previously announced New Sales target of EGP7 billion for the full year, and deliver more than 1,800 homes.

Key Financial Indicators

Financial Review

Under the previous accounting method, Revenue3 for 1H2016 grew by a remarkable 54% YoY to reach EGP2.3 billion. Despite changes in the accounting standards, Revenue increased 45% YoY to EGP2.1 billion, driven by a stronger pace of unit deliveries, accelerated construction activities and healthy sales momentum. Under the previous accounting method, Revenue for 2Q2016 increased 60% YoY to EGP1.2 billion. Under the current method, Revenue grew 46% YoY to reach EGP1.1 billion.

Under the previous accounting method, Gross Profit for 1H2016 increased 20% YoY to reach EGP779 million with a Gross Profit margin of 34%. However applying the new rules, Gross Profit decreased 2% YoY to reach EGP589 million, with a margin of 28%. Gross Profit for the quarter grew 25% YoY to be EGP385 million, but under the current method, Gross Profit for 2Q2016 amounted to EGP281 million, with a Gross Profit margin of 26%.

Under the previous accounting method, EBITDA for 1H2016 added 14% YoY and amounted to EGP524 million. Under the current method, EBITDA for 1H2016 decreased 19% YoY to EGP333 million.

The reasons for the YoY decline under the current accounting method are the following:

1. Adopting the current accounting method and therefore unable to record the sale of land for standalone units in full as revenue.

2. The Company adopts a first sold first delivered policy of delivering units and this quarter we continued to deliver units sold post the Arab Spring which were contracted at depressed prices and suffered a delayed delivery (including VGK project);

3. Change in mix/type of units delivered during 2Q2016 which include 328 apartments and 119 standalone units.

Under the previous accounting method and after normalizing 1H2015 figure, Net Profit before Tax & Minority Interest2 increased 47% YoY to reach EGP529 million. Net Profit before Tax & Minority Interest2 still increased by 8% YoY after applying the new rules to reach EGP338 million. Net Profit before Tax & Minority Interest2 for 2Q2016 recorded a growth of 76% YoY based on the old accounting rules and normalized 2Q2015 earnings. Applying the same methodology to Net Profit before Tax & Minority Interest2 under the current accounting method, it stood at EGP143 million, a growth of 17% YoY.

Under the previous accounting method and after normalizing 1H2015 figure, Net Profit after Tax & Minority Interest2 for 1H2016 amounted to EGP290 million, a decrease of 9% YoY due to the expiry of the Company's tax exemption and higher Minority Interest, which was also reflected in applying the new rules where Net Profit after Tax & Minority Interest2 for 1H2016 decreased 38% YoY to EGP169 million.

It's worthy to highlight that weighted average selling prices of land grew 27% YoY. In addition, weighted average selling prices of Built Up Area of standalone units and apartments remarkably increased by 47% and 29% YoY respectively.

Net Debt increased to EGP2.4 billion compared to EGP1.5 billion by end of FY2015, as the Company utilized EGP680 million from existing credit facilities.

By end of 1H2016, Receivables stood at EGP9 billion; compared to EGP7.6 billion by end of 2015, supported by the growth in New Sales.

BR: Before restatement figures (using the old revenue recognition method); R: Restated figures.

1- 2013 revenue and profit exclude the sale of the Village Mall for consideration of EGP240 million and EGP52 million respectively.

2- For illustrative purposes, Net Profit figures of 1H2015 & 2Q2015 were normalized by adding back provisions of EGP100 million and deducting EGP426 million of capital gain on the sale of non-core land bank in the North Coast and Alexandria.

3- PHD recognizes revenue on a "Percentage of Completion" basis for standalone units. Revenue from apartments and multi-tenants buildings are recognized only upon delivery.

Operational Review

Strong Sales Momentum

New Sales for 1H2016 stood at EGP3.4 billion, an increase of 32% YoY, mainly driven by the successful launch of Palm Valley, Palm Hills Katameya extension coupled with strong uptake in Capital Gardens and healthy demand for Golf views and Golf Extension, as well as the three Hacienda projects considering the demand for secondary homes in the North Coast usually peaks during the third quarter. It is worthy to highlight that 67% of units sold during 1H2016 were units priced at a range of EGP1.5 - 7 million.

New Sales for 2Q2016 stood solid at EGP1.2 billion, at par with the same period last year, despite the negative impact of the holy month of Ramadan.

In West Cairo, New Sales grew 51% YoY to record EGP2 billion during the first half of 2016, of which EGP788 million were generated from the recently launched Palm Valley project, a true indication of the soundness of Egyptian property market, and strong evidence of the sustainable and growing demand for the Company's product offerings.

In East Cairo, New Sales recorded EGP1.1 billion during 1H2016, a growth of 44% YoY, mainly driven by demand for Capital Gardens, and Palm Hills Katameya Extension. It is worthy to highlight that cumulative New Sales in Capital Gardens stood at EGP1.1 billion equivalent to 727 units, since the project's launch in December 2015.

In the North Coast, we have seen a good momentum as well with New Sales amounting to EGP351 million during 1H2016, despite the seasonality factor where demand for secondary homes is usually much stronger during the summer season.

By end of 1H2016, deliveries increased 36% YoY to 825 units, as opposed to 607 units for the same period last year. The Company delivered 447 units during the quarter, an increase of 27% YoY and 18% QoQ, exceeding the pre-set target for deliveries during the 2Q2016.

Construction works are on schedule, achieving an earned value of EGP1.1 billion in 1H2016, an increase of 20% YoY. The bulk of earned value relates to construction works in West Cairo followed by North Coast.

With regards to recurring income portfolio and commercial real estate, the segment contributed 14% to Net Profits, mainly from our three hotels and Palm Club, in line with our strategy to achieve 25% in Net Profits from recurring income by FY2020.

Following the launch of units sale in VGK Mall, we successfully secured sales worth EGP226 million. Palm Club revenue stood at EGP34 million and the number of memberships exceeded 2,200 mark. The Company is currently considering an additional office building in Golf Views.

Outlook

We are witnessing a strong third quarter in terms of New Sales and remain on track to deliver our New Sales target of EGP7 billion. With regards to handovers, we expect to deliver 1,800 units.

The Company expects to launch sales in the 500 feddan co-development project with NUCA in East Cairo during the fourth quarter of 2016. Although Hacienda West's master plan has been finalized, the Company opted to postpone the project's launch to 1Q2017, in order to focus on the existing North Coast projects.

The Company is still negotiating the 6,000 feddan project in West Cairo with NUCA and expects to reach a definite agreement before end of this year. The Company is still negotiating two land opportunities in the North Coast with size ranging between 150 and 500 feddan.

With regards to the recurring income and commercial real estate portfolio, the Company expects to finalize all construction works of Phase 8 office building, Village Gate & VGK Malls by beginning of FY2017.

The Company expects to monetize receivables of up to EGP2.5 billion in total over 2-3 years period, including a securitized bond issuance by up to EGP1 billion. The first transaction is foreseen to close during 4Q2016 for a total of EGP350-400 million in receivables relating to delivered units in the following projects: Golf Views, Golf Extension, PHK, PHK extension, and Hacienda Bay. Pricing remains to be defined based on the credit rating and market conditions at the time of launch.

Last but not least, the Company signed the LOI with contractor in order to commence constructions activities in Capital Gardens project. The contractors are currently mobilizing and are expected to start construction works of phase one by September 2016. Phase one will be developed over 36 months and will encompass 38 buildings (756 apartments).

Consolidated Income Statement

(Egyptian Accounting Standards)

In EGP 000's

2Q2016 R

2Q2015 R

Change

2Q2016 BR

2Q2015 BR

Change

Revenue

1,071,673

732,940

46%

1,185,695

740,555

60%

Cost of Revenue

(790,703)

(443,733)

78%

(800,406)

(433,322)

85%

Gross Profit

280,969

289,207

(3%)

385,289

307,233

25%

Gross Profit margin %

26%

39%

(13pp)

32%

41%

(9pp)

General administrative, selling and marketing expenses

(138,397)

(99,560)

39%

(138,397)

(99,560)

39%

EBITDA

142,572

189,648

25%

246,891

207,673

19%

EBITDA margin %

13%

26%

(13pp)

21%

28%

(7pp)

Administrative depreciation

(2,743)

(2,154)

27%

(2,743)

(2,154)

27%

Operating Profit

139,829

187,494

(25%)

244,148

205,519

18%

Less:

Interest expenses - amortization of discount on land liability

-

(3,129)

NA

-

(3,129)

NA

Finance costs & interests

(11,475)

(27,563)

(58%)

(11,475)

(27,563)

(58%)

Interest on land purchase liabilities

(31,164)

(59,886)

(48%)

(31,164)

(59,886)

(48%)

Provision

(1,246)

(99,662)

NA

(1,246)

(99,662)

NA

Add:

Gains on investments in fair value through profit or loss

1,294

1,134

14%

1,294

1,134

14%

Interest income - amortization of discount on notes receivables

11,515

23,050

(50%)

11,515

23,050

(50%)

Interest income

33,754

707

NA

33,754

707

NA

Capital gain on investment property

-

425,736

NA

-

425,736

NA

Net Profit Before Income Tax

142,507

447,878

(68%)

246,826

465,904

(47%)

Income tax expense

(34,210)

(9,226)

NA

(77,287)

(9,226)

NA

Deferred tax

(362)

(140)

NA

(362)

(140)

NA

Net Profit after Tax

107,934

438,513

(75%)

169,177

456,538

(63%)

Non-controlling interest

(44,030)

(25,293)

74%

(70,470)

(25,293)

NA

Net Profit after Tax & Minority Interest

63,904

413,219

(85%)

98,707

431,245

(77%)

Net Profit after Tax & Minority Interest margin %

6%

56%

(50pp)

8%

58%

(50pp)

EGP 000's

June 30, 2016

December 31, 2015 R

Long-Term Assets

Investments in Associates

75,531

78,506

Investment Property

854,665

854,665

Notes Receivable - Long Term

5,400,941

4,546,282

Projects Under Construction

939,235

858,654

Advance Payments for Investments Acquisitions

184,336

184,336

Fixed Assets (net)

333,648

334,623

Deferred Tax Asset

11,543

11,948

Other Long Term Assets

1,391

1,391

Employee stock ownership plan (ESOP)

62,190

Total Long-Term Assets

7,863,480

6,870,404

Current Assets

Works in Process

6,775,647

6,463,687

Held to Maturity Investments

151,072

613,046

Cash & Cash Equivalents

956,304

965,670

Notes Receivable - Short Term

2,709,161

2,371,035

Investments at Fair Value

61,880

67,113

Accounts Receivable

888,233

704,029

Suppliers - Advance Payments

349,174

384,777

Debtors & Other Debit Balances

228,246

174,854

Due from Related Parties

218,263

172,392

Minimum Guaranteed Payments - Co-Development Projects

90,000

-

Total Current Assets

12,427,981

11,916,602

Total Assets

20,291,461

18,787,006

Current Liabilities

Banks - Credit Balances

31,930

31,035

Banks - Overdraft

70,691

80,237

Advances from Customers

6,862,529

6,249,432

Completion of Infrastructure Liabilities

92,881

173,648

Provisions

118,555

116,844

Current Portion of Land Purchase Liabilities

286,175

263,319

Due to Related Parties

199,188

226,319

Investment Purchase Liabilities

44,257

44,257

Notes Payable - Short Term

665,607

473,693

Current Portion of Term Loans

496,988

80,814

Suppliers & Contractors

348,731

406,850

Income Tax Payable

80,147

46,631

Creditors & Other Credit Balances

526,500

345,368

Total Current Liabilities

9,824,178

8,538,447

Working Capital

2,603,802

3,378,155

Total Investment

10,467,283

10,248,559

Financed as Follows:

Shareholders' Equity

Issued and Paid-In Capital

4,617,899

4,344,640

Legal Reserve

624,902

585,104

Special Reserve

524,213

524,213

ESOP Re-Measurement Reserve

6,163

-

Retained Earnings (Deficit)

(69,311)

(212,391)

Net Profit for the Period/Year

169,331

915,563

Equity Attributable to Equity Holders of Parent Co.

5,873,198

6,157,129

Non-controlling Interest

355,179

270,774

Total Shareholders' Equity

6,228,377

6,427,903

Long Term Liabilities

Land Purchase Liabilities

218,029

268,236

Notes Payable - Long Term

422,456

148,532

Other Long Term Liabilities - Residents' Association

585,364

485,600

Loans

3,013,056

2,918,287

Total Long Term Liabilities

4,238,906

3,820,656

Total Equity & Long Term Liabilities

10,467,283

10,248,559

R: Restated figures.

About Palm Hills Developments

Palm Hills Developments, a leading real estate developer in Egypt, is a joint stock company established in 1997. Palm Hills builds integrated communities and has one of the most diversified land bank portfolios, spreading over 27.1 million square meters ("sqm") in Egypt, including 5 million sqm in Saudi Arabia. The Company's product offerings include primary homes on both West Cairo and East Cairo, as well as secondary homes by the Mediterranean Sea, North Coast.

As at end of 1Q2016, PHD delivered more than 5,130 units within its developments, including more than 1,500 units in 11 completed projects. Today, PHD has 14 projects under development, 6 projects in West Cairo, 6 projects in East Cairo and 2 projects in North Coast, translating into a sales backlog exceeding EGP9.1 billion. PHD is one of the most liquid and actively traded stocks on the Egyptian Stock Exchange, and is traded under the symbol "PHDC.CA".

The Company has a GDR listing on the London Stock Exchange, and is traded under the symbol "PHDC.LI".

For more information, please visit: www.palmhillsdevelopments.com/

Investor Relations Contacts

Mamdouh Abdelwahab

Ahmed Nour El-Din Hassan

Tel +202 35351200, Extension 1503

Investor.relations@phdint.com

Disclaimer

The information contained herein is restricted and is not for publication, distribution or release, directly or indirectly, in or into, the United States of America, Canada, Australia or Japan.

This document does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in connection with, any contract therefore. The Rights Issue and the distribution of this document and other information in connection with the Rights Issue in certain jurisdictions may be restricted by law and persons into whose possession any document or other information referred to herein comes should inform themselves about and observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.

The price and value of, and income from, the securities issued in the Rights Issue may go down as well as up. Persons needing advice should consult a professional adviser.

The Rights Issue is not being made in or into the United States of America or to any U.S. person (as defined in Regulation S under the United States Securities Act of 1933, as amended (the "Securities Act")). These materials are not an offer for sale of any securities in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from the registration requirements of Securities Act. The Company has not registered, and does not intend to register, any portion of the Rights Issue in the United States, and does not intend to conduct a public offering of any securities in the United States.

No person has been authorized to give any information or to make any representations other than those contained in this announcement and, if given or made, such information or representations must not be relied on as having been authorized by the Company. In addition, no agent or representative of the Company accepts any responsibility whatsoever for the contents of this document and no representation or warranty express or implied, is made by any agent or representative as to the information set out in this document.

Neither the content of the Company's website (or any other website, including but not limited to the websites of the Company's subsidiaries, joint ventures or restricted affiliates) nor the content of any website accessible from hyperlinks on the Company's website (or any other website, including but not limited to the websites of the Company's subsidiaries, joint ventures or restricted affiliates) is incorporated into, or forms part of, this announcement.

This document contains forward-looking statements, which include all statements other than statements of historical facts, including, without limitation, any statements preceded by, followed by or including the words "targets," "believes," "expects," "aims," "intends," "may," "anticipates," "would," "could" or similar expressions or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the Company's control that could cause the Company's actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which it will operate in the future. These forward-looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any of such statements are based.

This communication is only directed at (i) persons who are outside the United Kingdom; (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); and (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities referred to herein are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this communication or any of its contents.

Any offer of securities to the public that may be deemed to be made pursuant to this communication in any EEA Member State that has implemented Directive 2003/71/EC (as amended and together with any applicable implementing measures in any Member State, the "Prospectus Directive") is only addressed to qualified investors in that Member State within the meaning of the Prospectus Directive. This document is an advertisement and not a prospectus for the purposes of the applicable measures implementing the Prospectus Directive and as such does not constitute an offer to sell or the solicitation of an offer to purchase securities.