PHDC.L Regulatory News (PHDC)

PHD achieve 20% YoY growth in New Sales to record EGP14.9 billion during FY2019, compared to EGP12.5 billion in FY2018, beating market consensus and exceeding its EGP14 billion target. PHD record positive Cash Flows from Operations of EGP1.7 billion, the highest ever in the Company's history, compared to a negative EGP537 million in the previous year

Cairo/London (February 25, 2020) - 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 December 31, 2019.

Key Highlights

New Sales (Residential and Commercial) grew 20% YoY to record EGP14.9 billion in FY2019, translating into 2,470 units. Badya, The Crown, Palm Hills Alexandria, and Palm Hills New Cairo were the largest contributors to New Sales in 2019. In FY2019, Commercial New Sales stood at EGP1.0 billion, largely driven by the sale of office space in Golf Central for EGP684 million. While Hale Town and the Lane Mall contributed EGP143 million and EGP106 million respectively.

Revenue amounted to EGP6.2 billion in FY2019, a decrease of 16% YoY, mostly due to the YoY decrease in the number of handed over units, as most projects currently under development are nearing completion, noting that PHD had 708 units released from construction (in the process of handing over), including 250 units in Capital Gardens a couple of quarters ahead of schedule. PHD maintained a healthy Gross Profit margin of 37% in FY2019, compared to 35% in FY2018, mainly driven by the YoY growth in the value of units delivered.

In FY2019, EBITDA stood at EGP1.4 billion, a margin of 22%. Net Profit after Tax and Minority Interest amounted to EGP847 million, a growth of 4% YoY, implying a Net Profit margin of 14% and growth of 3pp YoY.

During the year, PHD concluded two securitization transactions for gross receivables of EGP1.5 billion, as part of the Company's plans to optimize leverage via monetization of receivables associated with handed over residential units.

As part of the leverage optimization program, PHD inked EGP1.1 billion syndicated medium-term loan to refinance Golf Views, Golf Extension and Palm Hills Katameya with Commercial International Bank of Egypt in December 2019. Furthermore, the Company signed EGP505 million credit facility to refinance Palm Parks with Ahli United Bank Egypt in January 2020. PHD received competitive financing packages on both facilities, which reduces the Company's financing charges moving forward. With the welcomed CBE's MPC's interest rate easing policy that was implemented since the beginning of 2019, the Company expects to conclude further debt restructuring transactions during 2020.

PHD achieved positive Cash Flows from Operations of EGP1.7 billion in FY2019, the highest in the Company's history, compared to a negative balance of EGP537 million in FY2018. Management expects such trend to continue during 2020.

The Company spent EGP1.9 billion on construction activities during the year, mainly on Badya, Palm Hills New Cairo, Palm Hills Katameya, Hacienda Bay, Golf Extension, Capital Gardens, Golf Views, Palm Valley, Woodville and The Crown.

Regarding handovers, PHD delivered 964 residential and commercial units during FY2019 mainly in the following projects: Woodville, Golf Extension, Golf Views, Palm Parks, Hacienda Bay, and Hacienda White 2. Since 2Q2019, the Company commenced early handovers in Palm Valley (133 units). In addition, the delivery of 68 units in Capital Gardens during 4Q2019, a couple of quarters ahead of planned handover schedule.

Yasseen Mansour, Chairman & Group CEO Comments:

I am pleased to share with you our full year 2019 financial and operational results. We promised the market to achieve positive Cash Flows from Operations during the year and we reached the EGP1.7 billion mark, which further solidifies our financial position, as we reversed the negative trend of 2018.

We refinanced some of our existing debt at much competitive terms, which is a strong testimony to the Company's sound and steadily improving financial position. We expect to optimize and restructure further debt during 2020.

We are ahead of schedule on all projects deliveries, evidenced by the early handovers in Palm Valley and Capital Gardens.

Despite the challenging market conditions witnessed during 2019, we have increased our market share and increased New Sales by 20% YoY from EGP12.5 billion in FY2018, to record EGP14.9 billion in FY2019, which is 6% higher than our previously announced target of EGP14 billion. We sold 2,470 units during the year, of which majority were sold in Badya, The Crown, Palm Hills Alexandria, and Palm Hills New Cairo. The fourth quarter of 2019 was one of the strongest quarters ever, where we saw an improvement in market momentum.

Looking at our Net Debt position, it amounted to EGP1.7 billion by end of FY2019, compared to EGP1.9 billion by end of FY2018. Receivables grew to EGP21.3 billion, where it covers Net Debt by 12.7 times. Net Debt/EBITDA stood at 1.2 times by end of FY2019.

We are planning to engage in further securitization and discounting transactions with a gross receivables portfolio of up to c.EGP1.2 billion during 2020, as the interest rate environment improve further, complemented by the conclusion of projects currently under developments.

Looking ahead into FY2020 financial targets, we expect to maintain 2019's New Sales level and spend c.EGP1.8 billion on construction.

Financial Review

In FY2019, Revenue amounted to EGP6.2 billion, a decrease of 16% YoY, mostly due to lower handed over residential units' YoY, as most projects currently under development are nearing completion, noting that PHD had 708 units released from construction by end of FY2019. While Revenue in 4Q2019 increased 47% YoY to reach EGP2.6 billion, following the stellar sales performance during the quarter, complemented by the handover of 284 units.

Gross Profit stood for the full year at EGP2.3 billion, translating into a Gross Profit margin of 37%, mostly due to the handover of high margin units. While Gross Profit for 4Q2019 grew 90% YoY to EGP884 million, a margin of 34%. In FY2019, EBITDA stood at EGP1.4 billion, a margin of 22%. EBITDA for 4Q2019 grew 210% YoY reaching EGP566 million. Net Profit after Tax and Minority Interest amounted to EGP847 million in FY2019, a growth of 4% YoY, implying a Net Profit margin of 14%, a growth of 3pp YoY. While Net Profit for the quarter increased 76% YoY to EGP302 million.

Net Debt amounted to EGP1.7 billion by end of FY2019, compared to EGP1.9 billion by end of FY2018, with Receivables of EGP21.3 billion solidifying our Balance Sheet where Receivables cover Net Debt 12.7 times. Net Debt/EBITDA stood at 1.2 times at year end.

Operational Review

New Sales recorded 20% YoY growth to EGP14.9 billion, of which EGP13.9 billion was generated from residential sales and EGP1.0 billion from the commercial segment. The Company sold 2,470 units during FY2019. Badya, The Crown, Palm Hills Alexandria and Palm Hills New Cairo were the largest contributors to New Sales in 2019.

Commercial New Sales stood at EGP1.0 billion during FY2019, largely driven by the sale of office space in Golf Central for EGP684 million. While Hale Town and the Lane Mall contributed EGP143 million and EGP106 million respectively.

The following chart shows percentage contribution of each operating region to New Sales during the year:

In West Cairo, New Sales amounted to EGP8.4 billion, of which EGP7.4 billion was generated from the sale of residential units across all the projects, with the balance generated by the commercial segment. The largest contributors to residential sales were Badya, The Crown and Palm Parks. While commercial sales were driven mainly by Golf Central, as it generated EGP684 million, followed by Hale Town (EGP143 million) and The Lane Mall (EGP106 million).

In East Cairo, New Sales stood at EGP2.5 billion in FY2019, of which EGP2.4 billion was generated from Palm Hills New Cairo.

North Coast and Alexandria recorded New Sales of EGP4.0 billion during FY2019, fueled by demand for Palm Hills Alexandria and Hacienda Bay.

The Company handed over 964 residential and commercial units during FY2019 mainly in these projects: Woodville, Golf Extension, Golf Views, Palm Parks, Hacienda Bay, and Hacienda White 2. The Company delivered 133 units in Palm Valley in West Cairo ahead of schedule starting from 2Q2019. Furthermore, PHD handed over 68 units in Capital Gardens during 4Q2019, a couple of quarters ahead of planned handover schedule, as the first phase of said project is nearing completion.

Number of memberships in Palm Hills Club stood at 3,461 memberships by end of 2019.

About Palm Hills Developments

Palm Hills Developments ("PHD"), a leading real estate developer in Egypt, is a joint stock company established in 1997. The Company builds integrated communities and has one of the most diversified land bank portfolios, spreading over 41.8 million square meters ("sqm") in Egypt, including 5 million sqm in Saudi Arabia. PHD'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 FY2019, PHD delivered 10,611 units within its developments. Today, PHD has 8 projects under development, 3 projects in West Cairo, 3 projects in East Cairo and 2 projects in the North Coast, in addition to 7 new projects including 6 co-developments, translating into a sales backlog of c.EGP15 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/

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