Amer Group Reports 1Q 2014 Earnings

Transcription

1 Amer Group Reports 1Q 2014 Earnings Group reports strong sales although related commissions and marketing expenses mute bottom line; recognized revenues from historical sales set to grow significantly in balance of 2014 AMER.CA on the Egyptian Exchange Shareholder Structure Mansour Amer Mohamed El-Amin Ragab Amer Wakf Ltd. SOL Global Holdings Ltd. Finby Estates Ltd. Free Float Q 2014 Highlights Revenues of EGP million, a 10.5% year-on-year rise and in line with expectations given expectations of rising deliveries later in Total New Real Estate Sales Value of EGP million in 1Q14, up 72.1% from the previous year. Gross Profit of EGP 93.4 million, a rise of 20.9%, with a resulting Gross Profit Margin of 39.3%, a 4.7 percentage point improvement from 1Q13. An Operating Loss of EGP 0.4 million, against an Operating Profit of EGP 25.6 million in 1Q13 on the back of Commissions on New Sales and the increased Marketing Expenses that delivered those sales. Net Profit after Taxes and Minority Interest of EGP 2.0 million. Total Assets of EGP 6.7 billion, up 7.2% from 31 December Cash on Balance Sheet rose 15.2% to EGP million on the back of continued collection momentum. Improvement of already-low debt-to-equity ratio to Amer Group (AMER.CA on the EGX), a leading regional developer of large-scale, mixed-use family-friendly communities, has released its consolidated financial results for the quarter ending 31 March 2014, reporting a Net Profit of EGP 2.0 million on Revenues of EGP million. Total New Real Estate Sales * in the quarter, which include both residential and commercial units, climbed 72.1% year-on-year to EGP million on a strong sales performance backed by an aggressive national advertising campaign. Implied priceper-unit rose more than 4.5% despite continued challenging economic conditions nationwide, underscoring the fundamental appeal of the Porto brand to the Group s core market. Robust sales and Amer Group s industry-leading two-year collection and construction cycle thus extend the Group s strong anticipated revenue pipeline well into In line with previously communicated guidance, Amer Group experienced a mismatch between recognized historical revenues in 1Q14 and the pace of expenditure on commissions and marketing expenses necessary to continue growing the business. That imbalance will right itself beginning in the second quarter as the Group expects strong deliveries in 2014 from projects including Porto South Beach, Porto Sharm, * Total New Real Estate Sales represents the total value of new unit sales made in a period, and is distinct from total revenues recognized in the Real Estate segment. The Group recognizes 100% of revenues from a real estate transaction in the quarter in which (a) the unit is ready for delivery and (b) 80% of the unit sale price has been collected from the client. AMER-GROUP.COM 1

2 Porto Cairo Mall, Porto Golf Bay, Porto Marina Residence and The Hanging Gardens communities in Golf Porto Sokhna, among others. If the past three years have been about weathering a storm, 2014 is about building a robust revenue pipeline that capitalizes on the enduring family-friendly proposition for which our core audience turns to Amer Group, said Amer Group Chairman Mansour Amer. Revenues 1Q From the grand opening of Porto Cairo Mall in April 2014 to to the remarkable calendar of entertainment options and activities we have put together across our communities, 2014 is about building excitement as we continue to target rising proportion of revenues from both recurring sources and from first-home developments following our very successful penetration of that segment last year. Operational highlights of the past quarter include breaking ground and launching sales at Porto Dead Sea, the Group s first destination in Jordan; the official inauguration of Porto Cairo Mall; finalization of designs for Porto Agadir in Morocco and substantial progress on permitting there; and the start of operations at Egyptian fast-food brand Humhum, the latest Amer-owned entry to join the Group s restaurant portfolio. Management s analysis of the Group s financial and operational performance follows, while Amer Group s full consolidated financial statements for 1Q14 are presently available for download at amer-group.com. Revenues 1Q Q 2014 Financial Performance (all figures in EGP mn unless otherwise indicated) Revenues* % Cost of Revenues (144.4) (138.0) 4.7% Gross Profit % Gross Profit Margin 35.9% 40.6% 4.7 pts Operating Profit 25.6 (0.4) - Operating Profit Margin 11.9% (0.2%) - Net Profit After Tax & Minority (86.8%) Net Profit Margin 7.1% 0.2% (6.9 pts) EBIT (98.7%) Change Total Assets 6, , % Cash % Debt (13.9%) Equity 1, ,789.3 (8%) Net Debt to Equity Real Estate Restaurants Malls Hotels Retail and Other * Beginning with 1Q2014, Group Revenues have been reclassified to bring Malls segment revenue to the top line of Group Statutory Financials. Historical figures have been re-stated. AMER-GROUP.COM 2

3 Total recognized Real Estate Revenues accounted for 66.9% of Group Revenue in 1Q14, followed by Restaurants, Hotels and Malls. Beginning with 1Q 2014, Group Revenues have been reclassified to bring Malls segment revenue to the top line of Group Statutory Financials. Historical figures have been restated. Gross Profit improved 20.9% year-on-year on the back of a lower Cost of Revenues. Management continues to study historical sales vs. Cost of Revenues patterns in light of anticipated market demand to optimize land use (and hence margins) at each community developed going forward. Amer Group reported a small Operating Loss of EGP 0.4 million in the quarter as recognized historical sales were outweighed by high commissions on an exceptionally strong quarter of sales, higher than usual marketing spending to support the quarter s sales performance, as well as marketing and pre-operating expenses associated with Mall properties whose top-line impact will be felt only starting in the second quarter. Accordingly, it is management s view that the Group s 148.3% uptick in sales and marketing expenses in 1Q14 should be benchmarked not against 1Q14 Revenues (which reflect historical sales made c. 24 months in the past), but rather against 1Q14 Total New Real Estate Sales, which rose 72.1% to EGP million. At the operating profit level, the star performer of the quarter was the Restaurants division, which posted an EGP 2.0 million operating profit in the first quarter under a new management team, compared with an operating loss of EGP 3.3 million in the same quarter of The Malls division, meanwhile, saw its contribution to Group operating profit fall as it carried pre-launch expenses related to the opening in 2Q14 of Porto Cairo Mall and the expenses related to its legal restructuring. Meanwhile, the net operating loss of the Hotels division eased only 1.6% despite a near-tripling of revenues as the division carried in 1Q14 (historical low season) the marketing and pre-operational expenses of a property set to begin operations in the second quarter. Other Income on the Income Statement relates primarily to transfer units (cancellations and rebookings), revenues from sponsorships and telefrique operations, among other non-core activities. Prior to 1Q 2014, Malls segment was captured on the Other Income line. Beginning with this quarter, the Group has revised accounting policies for 2014 to allow revenue from the Malls segment to be included in Amer Group s top line following its restructuring. On the Balance Sheet front, Advances from Customers and New Real Estate Contracts surged 64.3% to EGP 6.6 billion, while Provisions declined more than 28.3% to EGP 6.5 million, underscoring both the Group s continued ability to collect from clients and the high quality of the projected revenue stream. Cash on the Balance Sheet rose 15.2% to EGP million, while Total Debt alongside Land Liabilities are down, emphasizing the Group s robust, highlyliquid financial position. Amer Group s land bank, on which it plans future investment according to the company s development plan, stands at 2.3 million square meters. Amer Group continues to view excessive land banks as non-productive inventory, preferring instead to acquire land on a project-by-project basis at low-to-no cost on revenue sharing agreements with land owners. AMER-GROUP.COM 3

4 Segment Analysis: Real Estate (66.9% of total 1Q14 Revenues) Amer Group builds and sells residential and commercial real estate at 14 Porto-branded first-home and vacation communities across Egypt and is now building or in the planning stages for communities in Morocco, Jordan and Syria. Total Number of Units (Units) 15,485 17, % Units Sold (Units) % Total New Sales Value (EGP mn) % Units Delivered (Units) (2.7%) Revenues Recognized (EGP mn) (1.2%) Operating Profit (EGP mn) (52.9%) Operating Profit Margin (%) 29.9% 14.3% (52.3%) The implied price per unit rose c. 4.5% in 1Q14, again reflecting enhanced pricing power at second-home destinations and the contribution of higher-value first-home sales from the Group s successful entry into this segment in Notably, the EGP million in Total New Sales Value in 1Q14 (an increase of 72.1% from the same quarter last year) does not include an additional EGP 53.7 million in sales to the Porto Vacation Club, which the Group sees as an important driver of high-margin revenues going forward. The Real Estate division is targeting deliveries in FY14 at South Beach, Porto Sharm, Porto Cairo Mall, Porto Golf Bay, Porto Marina Residence and the Hanging Gardens communities in Golf Porto Sokhna. Sales efforts in FY14 will focus on Porto October, Porto New Cairo, Porto Cairo and Porto Sharm in Egypt, alongside Porto Dead Sea in Jordan and Porto Agadir in Morocco. In Jordan, the Group has broken ground and launched sales at Porto Dead Sea. The 800,000 square-meter development will become a landmark in entertainment and services as a family-friendly destination on the banks of the Jordanian Dead Sea. The community will offer visitors a five-star Porto hotel, luxury villas and apartment units catering to a range of budgets, with phase one of the eight-phase project set to be open within one year. Porto Dead Sea will ultimately include 11,000 residential units and three malls with 550 shops and restaurants. Meanwhile, in Morocco, the Group has finalized designs for Porto Agadir in Morocco, where the Group is now in the final stages of obtaining all necessary regulatory permits in the expectation of breaking ground and launching sales within the coming three months. Amer Group sees Jordan and Morocco among other markets as high-potential markets with room to grow an attractive, family-friendly brand. Management will replicate in expansion markets the same formula as in Egypt, first establishing the market for family-centered vacation communities, then penetrating the higher margin first-home segments. Expansion territories will serve as springboards for the roll-out of the complete Porto experience, from golf courses and child-focused animation activities to Amer-brand restaurants and vacation clubs. AMER-GROUP.COM 4

5 Segment Analysis: Restaurants (21.1% of total 1Q14 Revenues) Amer Group owns and operates family-friendly restaurants under both licensed global and regional brand names and its own proprietary brands. The division includes a central kitchen that provides services to all Amer Group restaurant brands and catering operations. Operational restaurants (Restaurants) % Total Available Seats (Seats) 9,218 8,644 (6.2%) Average Spend per Cover (EGP mn) (8.7%) Segment Revenue (EGP mn) % Operating Profit (EGP mn) (3.3) 2.0 n/m Operating Profit Margin (%) (7.3%) 4.1% n/m In FY12 and FY13, the Restaurants division accounted for a more than a fifth of total Group revenues, but made a net negative contribution at the operating profit level. Management retained in late 2013 senior Egyptian entrepreneur and banker Alaa Samaha to manage the Group s Restaurant activities in a turnaround scenario. The new management team s emphasis at Tropicana for Projects (TP, one of two segment subsidiaries and the primary operator of restaurants) will be on operational and financial restructuring and the implementation of world-class governance standards. That turnaround began showing results in 1Q14 as the Restaurants division swung to an operating profit. Management believes the recovery will gather speed as the year progresses. New restaurant openings in the quarter 1Q14 include three outlets at Porto Cairo Mall (Studio Misr and Chili s) and one at Cairo Festival City (Chili s and Studio Misr). Also now open is the first branch of Humhum, an Egyptian-food fast service restaurant and one of two Amer-owned brands that will launch in the current calendar year. Tropicana for Projects continues to explore the rights to a potential new upscale dining franchise and is actively exploring opportunities to franchise Groupowned brands in the Gulf Cooperation Council or otherwise expand to the GCC. Tropicana for Food Industries (TFI), the Restaurant division s second subsidiary, supplies all Amer-operated restaurants. The Group has planned new investment in TFI to allow it to improve efficiency and capacity with a view to providing food preparation services for non-amer brands. Further announcements in this respect are expected in the second half of the year. Segment Analysis: Malls (3.2% of total 1Q14 Revenues) Amer Group s Malls division operates Meeting Point malls in six locations around Egypt, including Porto New Cairo, Porto Marina, Porto Golf Marina, Sky mall, Waterfront Mall, and Mega Mall. The division generates revenues primarily through commissions generated from leasing units to commercial operators on behalf of unit owners as well as management fees for each facility. Gross Leasable Area (GLA) (sqm) 44,813 86, % Number of Tenants (Tenants) (30.6%) Revenues (EGP mn) (18.7%) Operating Profit (EGP mn) (85.0%) Operating Profit Margin (%) 58.5% 10.8% - AMER-GROUP.COM 5

6 The Division reported a sharp decline in Operating Profit owing to marketing and other expenses related to the grand opening in 2Q14 of Porto Cairo Mall as well as the establishment of a new company to manage the division. Gross Leasable Area (GLA) expanded sharply year-on-year and quarter-on-quarter with the grand opening of the flagship Porto Cairo Mall in April, featuring 35,000 square meters of gross leasable area and with more than two dozen tenants, including major local, regional and international brands, already opened in Phase 1 of the three-phase project. In addition to unique attractions including on-site skydiving and an Airbus jetliner simulator, Management has rolled out an aggressive promotional campaign and entertainment schedule featuring major national and regional acts to promote the destination. The division continues to focus on lease-out activities at Porto October while preparing to enter the Jordanian and Moroccan markets. The division is targeting a portfolio of 17 managed properties by the end of Segment Analysis: Hotels (5.6% of total 1Q14 Revenues) Amer Group s Hotels division manages properties in Porto Marina, Porto Golf Marina and Porto Sokhna and is developing new properties in Porto Matrouh Beach Resort. Available Rooms (Room nights) 77,301 42,210 (45.4%) Room Revenues (EGP mn) % Food Revenues (EGP mn) % Other Revenues (EGP mn) % Total Revenues (EGP mn) % Operating Profit (EGP mn) (7.6) (6.4) n/m Operating Profit Margin (%) The Hotels segment s operating losses declined slower than did nearly 3x expansion of revenues as the segment bore in first quarter marketing expenses related to the launch of the hotel property at Porto Matrouh in summer. Amer Group views a vibrant Hotels division as central to its communities. New openings this year will be in Porto Matrouh Beach Resort, Porto South Beach, and Porto Tartous in Syria. Segment Analysis: Retail and Others (3.2% of total 1Q14 Revenues) Other Group activities include Total Facilities Management (Total FM, which provides facilities management and maintenance for all Amer Group developments), Porto Home (home furnishing retail), newly established entities, special purpose vehicles and holding-level functions at Amer Group. Revenues (EGP mn) % Operating Profit (EGP mn) (17.1) (19.5) - Recent Corporate Developments Amer Group issued 1.5 billion bonus shares to shareholders in a one-for-two ratio on 13 May 2014, bringing total issued shares to 4,559,544,644 from 3,039,696,429. AMER-GROUP.COM 6

7 Income Statement 1Q Q 2013 (EGP) (EGP) Change Revenue 237,732, ,173, % Cost of revenue (144,396,148) (137,943,524) 4.68% Gross Profit 93,336,215 77,229, % Selling and marketing expenses (50,086,473) (20,170,528) % General and administrative expenses (44,515,341) (34,150,302) 30.35% Other income 14,196,079 16,228, % Other operating expenses (13,283,869) (13,520,894) -1.75% Operating Profit (353,389) 25,616, % Interest income Finance costs 6,231,928 (14,051,364) % Foreign exchange loss 866,463 14,421, % Company s share in the investment sister company Profit for the year before tax 6,745,002 25,986, % Income tax (4,718,035) (10,634,137) % Profit for the year 2,026,967 15,352, % AMER-GROUP.COM 7

8 Balance Sheet 31 March December 2013 Change Non-current assets Fixed assets 900,356, ,671, % Investment property 221,284, ,458, % Intangible assets 1,441,814 2,863, % Investment in associate 2,524,720 2,524,721 - Advance payments for investment acquisition 294,841, ,934, % Restricted deposits due to units owners 467,038, ,202, % Deferred tax assets 26,630,454 16,574, % Total Non-Current Assets 1,914,119,072 1,885,229, % Current assets Development properties 3,173,205,260 2,936,940, % Inventories 23,214,381 22,477, % Accounts and notes receivable 212,468, ,657, % Prepayments and other receivables 424,099, ,090, % Bank balances and cash 942,430, ,006, % Total Current Assets 4,775,418,402 4,356,172, % Current liabilities Provisions 6,494,987 9,058, % Bank overdrafts 47,653,182 49,120, % Land purchase liability 33,653,234 32,365, % Advanced from customers 3,370,575,012 2,986,458, % Accounts and notes payable 217,018, ,155, % Term loans 94,061, ,661, % Income tax payable 56,653,146 42,983, % Accrued expenses and other payables 535,092, ,361, % Total Current Liabilities 4,361,202,124 3,778,163, % Working Capital 414,216, ,008, % Total Invested Funds 2,328,335,350 2,463,237, % Financed as follows: 4,354,707,137 3,769,105, % Equity Share capital 547,145, ,763, % (522,697) (118,055) % Legal reserve 73,523,307 60,823, % General Reserve 842,330, ,330, % Other reserve 14,298,665 14,298, % Retained earnings 315,609, ,371, % Merger reserve - - Equity attributable to owner of the company 1,792,384,564 1,920,469, % Treasury shares - - 1,792,384,564 1,920,469, % Minority Interest (3,066,971) (2,385,896) 28.55% Total Equity 1,789,317,594 1,918,084, % Non-current liabilities Term loans 57,625,107 76,825, % Land purchase liability 12,405,407 14,125, % Deposits due to units owners 467,038, ,202, % Notes payable 1,948,388 - Deferred tax liability - - Total Non-Current Liabilities 539,017, ,153, % Total Shareholders Equity and Long Term liabilities 2,328,335,350 2,463,237, % AMER-GROUP.COM 8

9 Investor Contacts Muhammad El Ebrashi Group Treasury and Investor Relations Director Mohamed Zaki Investor Relations Analyst Riad Refaat Chief Financial Officer Tel: +20 (0) Fax : +20 (0) About Amer Group Established in 2007, Amer Group is the Middle East and North Africa s leading developer of large-scale mixed-use family-friendly destinations that combine upscale residential, retail and office space in addition to world-class restaurants. Amer Group operates across four primary interlinked lines of business, including Real Estate, Malls, Restaurants and Hotels; other wholly-owned Amer subsidiaries offer facilities management, sales and vacation club services, among others, to Amer developments. Listed on the Egyptian Exchange (EGX) under the symbol AMER.CA, Amer Group is headquartered in Cairo. The company takes pride in developing new communities; creating jobs; and embracing family values at all of its developments. In 2008, the lead shareholders donated 33% of its shares to an Egyptian endowment to support funding for charity projects. The endowment s shareholding following the company s IPO stands at 24%; all returns support charities as part of the Group s mission to support social investing. Learn more about our Group and our projects at amer-group.com. Forward Looking Statements Statements contained in this document that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Amer Group. Such statements involve known and unknown risks, uncertainties and other factors; undue reliance should not be placed thereon. Certain information contained herein constitutes targets or forward-looking statements, which can be identified by the use of forward-looking terminology such as may, will, seek, should, expect, anticipate, project, estimate, intend, continue or believe or the negatives thereof or other variations thereon or comparable terminology. Actual events or results or the actual performance of Amer Group may differ materially from those reflected or contemplated in such targets or forward-looking statements. The performance of Amer Group is subject to risks and uncertainties. AMER-GROUP.COM 9