Palm Hills Development Company (CA:PHDC) continues to perform well at the top line with record annual revenues of EGP5.6bn driven by the company’s best year for both reservations and the delivery of units. The accelerated construction programme is helping to mitigate the effects of inflation and management reports a strong start to 2017 in terms of both sales and construction. Improvements in the balance sheet are expected as the securitisation programme that began in Q416 brings forward cash flows and helps to pay back debt.
Operational success drives performance
Palm Hills sold EGP8.5bn of new homes in FY16 (more than any other Egyptian developer), spent EGP2.3bn on construction and delivered 2,049 units to customers. The highly successful launches of Capital Gardens and Palm Hills New Cairo provide encouraging examples of what may come from further residential project launches in 2017. The devaluation of the Egyptian pound has made Egyptian property cheaper for overseas buyers (notably Egyptians working in the Gulf States) and the inflationary effect on costs is mitigated to some extent by Palm Hill’s accelerated building programme. EBITDA of EGP1bn fed through to net income of EGP640m, which, adjusted for gains on sales of land in FY15, was 50% higher than 2015. Management expects to meet its target of completing all current residential projects by FY18, bringing forward revenues and profits. The completion of two commercial projects should add to the recurring income stream, which made up 11% of net profits in FY16, with the aim of contributing 25% in FY20.
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