Amer Group Reports 2Q / 1H 2014 Earnings

Transcription

1 Amer Group Reports 2Q / 1H 2014 Earnings Group reports 49% increase in revenues in 1H14 on the back of robust sales across LoBs; Total New Real Estate Sales Value of EGP 2 bn; strong pace of deliveries across all Porto communities. AMER.CA on the Egyptian Exchange Shareholder Structure 3.51% 6.78% 7.3% 20.54% 11.9% REAL ESTATE LOB 35.18% 14.54% Lantess Internatinal Limited Mohamed El-Amin Ragab Amer Wakf Ltd SOL Global Holdings Ltd Finby Estates Ltd. Egyptian Wakf Ltd Free Float EXCLUDING REAL ESTATE LOB 1H 2014 Highlights Revenues of EGP 675 mn, a 49% increase Y-on-Y rise, driven by outstanding sales performance across the Real Estate, Hotels, Restaurants, Malls and Other lines of business. Total New Real Estate Sales Value of EGP 2 bn in 1H14, up 27% from 1H13. Gross Profit of EGP 260 mn, a rise of 73%, with a resulting Gross Profit Margin of 39%, a 5 percentage point improvement from 1H13. An Operating Profit of EGP 46 mn in 1H14, an increase of 63% over EGP 28 mn in 1H13. Notably, the year-to-date Operating Profit was wholly generated in 2Q14, off-setting the 1Q14 Operating Loss of EGP 0.4 mn. Net Profit after Taxes and Minority Interest of EGP 44 mn, a nearly threefold rise over EGP 16 mn in 1H13. Total Assets of EGP 7 bn, up 11.3% from 31 June Cash on Balance Sheet rose 23.6% to EGP 1 bn. 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 six months ending 30 June 2014, reporting a Net Profit of EGP 44 mn on Revenues of EGP 675 mn. Total New Real Estate Sales * in 1H14, which include both residential and commercial units, climbed 27% Y-on-Y to EGP 2 bn on the back of continued strong marketing spending across 1Q and 2Q14. Implied price-per-unit rose nearly 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 Operational highlights of 1Q and 1H14 include a strong pace of deliveries across all Porto-branded communities; operational and financial turnarounds at the Hotels and Restaurants divisions on a 1H basis; continued roll-out of the Group s entertainment strategy, which is seeing top regional and global performers appear at Porto communities; and continued progress on the Group s regionalization effort at planned developments in both Jordan (Porto Dead Sea) and Morocco (Porto Agadir). * 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 We are particularly pleased with the pace and tenor of our growth story in the first half of this year, said Amer Group Chairman Mansour Amer. Five of our six lines of business showed double-digit revenue improvement, a performance we attribute to the strength of our brand, our strategy, and our team s ability to connect to the consumers we serve. Management s analysis of the Group s financial and operational performance follows, while Amer Group s full consolidated financial statements for 1H14 are presently available for download at amer-group.com. Amer-group.com 2

3 Revenues 1H % 4% 3% 16% 71% 1H 2014 Consolidated Financial Performance Highlights (all figures in EGP mn unless otherwise indicated) 1H13 1H14 Change Revenues* % Cost of Revenues (287) (415) 45% Gross Profit % Gross Profit Margin 34.4% 38.5% Operating Profit % Operating Profit Margin 6.5% 6.8% Net Profit After Tax & Minority % Net Profit Margin 3.8% 6.6% EBIT % Total Real Estate Total Restaurants Total Meeting Points Total Hotels Retail and Others Change Total Assets 6, , % Cash , % Debt % Equity 1, , % Debt to Equity Revenues Total recognized Real Estate Revenues accounted for 70.6% of Group Revenue in 1H14, followed by Restaurants, Hotels and Malls. Historical sales recognized as revenues in 1H14 reflect the sharp concentration of sales in specific locations and community types prior to the launch of the Group s diversification drive in Second home communities accounted for 90.0% of recognized real estate revenues, with commercial real estate sales accounting for the remaining 10%. Within total Recognized Real Estate Revenues, three second-home developments together accounted for 74% of total recognized real estate revenues. By comparison, New Real Estate Sales in 1H14 were distributed as 39.1% secondhome communities, 36.9% first-home communities, and 24.0% commercial. While one community accounted for 34.7% of sales, no single other community accounted for more than 11.5% of New Real Estate Sales in 2Q14. Cost of Revenue: rose 45% against an increase in Revenues of 54%, allowing Gross Profit Margin to improve to 38.5% in 1H14, a 4.1 pp increase over the 1H13 figure of 34.4%. 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 an Operating Profit of EGP 46 mn in 1H14 as the delivery of units at a number of developments reversed the mismatch experienced in 1Q14 between revenues (representing historical real estate sales recognized under the Group s revenue recognition policy) and the pace of expenditure on commissions and marketing expenses (a current expense). Likewise, Recognized Revenues at the Real Estate division rose by 55% Y-on-Y to EGP mn in 1H14 and Real Estate Operating Profit rose 10% to 76.5 mn. In terms of Operating Profit, however, the standout performer of 1H14 was the Hotels division, which posted an EGP 2.1 mn Operating Profit in 1H14, up from * 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 3

4 an Operating Loss in 1H13 of EGP 9.3 mn. The turnaround comes on the back of both a sustained marketing effort and what management believes are early signs of a recovery in consumer sentiment. The Restaurants division also saw Operating Profit turn positive in line with the ongoing turnaround taking place in that division following the recruitment of new management (see our 1Q14 Earnings Release for additional detail). Accounting for 3.6% of Group Revenues, the Retail and Others segment saw a marked improvement in 1H14 recording EGP 20.3 mn in revenues; a 166% increase over 1H13 figure of EGP 7.6 mn. The segment s operating profit however continued to fall in the red albiet at the same levels of 1H13. When pitted against the surge in revenues, the segment s overall performance shows a significant improvement as the gap between its revenues and costs comes to a close. On the Balance Sheet front, Advances from Customers and New Real Estate Contracts inched up 5.3% to EGP 6.95 bn, while Provisions declined more than 53% to EGP 4.6 mn, 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 23.6% to EGP 1,010.7 mn, 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 mn 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. 32% 45% 21% 38% 1H 13 New Real Estate Sales by Type 1H 14 30% 34% Commercial First Home Second Home 10% 57% 1H 13 40% Recognized Real Estate Revenues by Type 1H 14 3% 90% Amer-group.com 4

5 Real Estate LoB (70.6% of total 1H14 Revenues) Amer Group builds and sells residential and commercial real estate at 14 Portobranded first-home and vacation communities across Egypt and is now building or in the planning stages for communities in Morocco, Jordan and Syria. 1H13 1H14 Change Total Number of Units (Units) 16,513 18,392 11% Units Sold (Units) 1,553 1,879 21% Total New Sales Value (EGP mn) 1, , % Units Delivered (Units) 422 1, % Revenues Recognized (EGP mn) % Operating Profit (EGP mn) % Operating Profit Margin (%) 23% 16% -29% The implied price per unit for new sales rose c. 4.9% in 1H14, 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 Also reflected in this are contributions from Porto Cairo Medical, the Group s first entry into that segment of the market. Notably, the EGP 1.9 bn in Total New Sales Value in 1H14 does not include an additional EGP mn in sales to the Porto Vacation Club, which the Group believes will become an important driver of high-margin revenues going forward. The Real Estate division has begun delivery of units at the Golf Bay Marina development on the North Coast as well as at the the Porto Matrouh development on the Mediterranean, laying the groundwork for eventual recognition of these sales as revenues. The division is targeting further deliveries in FY14 at South Beach, Porto Cairo Mall, Golf Bay, Porto Marina Residence and the Hanging Gardens communities in Golf Porto Sokhna. The Group continued to make strong progress on construction and sales at inprogress communities: At Porto New Cairo, the Group has issued a call for tenders for the second phase of the community and has confirmed a December 2015 delivery date for Phase I. At the nearby Porto Cairo Medical, 109 of 116 planned units available in Phase I have been delivered. The Group is on track to complete the world-class, 18-hole golf course at Golf Porto Sokhna by 2017; the community will also feature North Africa s first cable car transport system. Amer Group s sustained effort to develop family-friendly entertainment programming continued in 2Q14 with preparations for the month-long Indian Carnival at its Golf Porto Marina community in August. The same destination hosted Latin music superstar Enrique Iglesias on 9 August. April 2014 saw the sales soft-launch of Porto Dead Sea, an 800,000 sqm development with a projected built-up area of c. 840,000 sqm, which will ultimately include a five-star Porto hotel; 11,000 residential units; and three malls with 550 shops and restaurants. Meanwhile, designs for the group s flagship development in Morocco, Porto Agadir, are nearing completion. Looking Ahead Sales efforts in 2H14 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. Amer-group.com 5

6 Amer Group sees Jordan and Morocco among other markets as highpotential 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. Restaurants LoB (16.0% of total 1H14 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. 1H13 1H14 Change Operational restaurants (Restaurants) % Total Available Seats (Seats) 9,130 9,241 1% Average Spend per Cover (EGP) % Segment Revenue (EGP mn) % Operating Profit (EGP mn) (2.3) Operating Profit Margin (%) -2% 0% - RESTRUCTURING ACTIVITIES NEW ESTABLISHMENTS Management s turnaround strategy aiming to bring the Restaurants division back into positive operating profit territory bore fruit in 1H14, as the group posted a 0.4 mn Operating Profit in the half, compared to a loss of EGP 2.3 mn in 1H13. CAPEX New restaurant openings in 1H14 include three outlets at Porto Cairo Mall (Studio Misr, Johnny Carino s and Chili s) and two at Cairo Festival City (Chili s and Studio Misr) in Egypt as well as a Studio Misr in Abu Dhabi. Also noteworthy, the division announced in June that it is preparing to open additional new locations in Egypt and in the Gulf. 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 2H14. 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. Amer-group.com 6

7 Malls LoB (3.4% of total 1H14 Revenues) Amer Group s Malls division operates Meeting Point malls in six locations around Egypt, including Meeting Point Tagamoa, Porto Marina Mall, Golf Marina Mall, 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. 1H13 1H14 Change Gross Leasable Area (GLA) (sqm) 46,502 86,113 85% Number of Tenants (Tenants) % Revenues (EGP mn) % Operating Profit (EGP mn) % Operating Profit Margin (%) 39% 23% -40% The Division reported a decline in Operating Profit in 1H14, 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 Y-on-Y with the grand opening of the flagship Porto Cairo Mall in April. Management announced in June that the Group is on-track to launch the second phase of the Porto Cairo Mall in 2H14 with anchor tenants to include top brands controlled by global franchise players; as of June, the Group had secured tenants for more than 50% of the gross leasable area at the mall. Meanwhile, the division continues to focus on lease-out activities at Porto October; has inaugurated its Porto Dead Sea development in Jordan and is preparing to enter the Moroccan market. The division is targeting a portfolio of 17 managed properties by the end of Hotels LoB (6.4% of total 1H14 Revenues) Amer Group s Hotels division manages properties in Porto Marina, Porto Golf Marina and Porto Sokhna and has inaugurated new properties in Porto Matrouh Beach Resort. 1H13 1H14 Change Available Rooms (Room nights) 159, ,088-29% Room Revenues (EGP mn) % Food Revenues (EGP mn) % Other Revenues (EGP mn) % Total Revenues (EGP mn) % Operating Profit (EGP mn) (9.3) Operating Profit Margin (%) -43% 5% - The Hotels segment saw Revenue double and saw an even more dramatic improvement at the Operating Profit level, where the division reported a positive EGP 2.1 mn, as compared to a loss of EGP 9.3 mn in 1H13. The reversal comes as a result of both a strong marketing effort and what management believes is an uptick in consumer sentiment. In June 2014 the Group inaugurated its Porto Matrouh Beach Resort development which enjoyed a 58% occupancy rate during its first month of operations. The Group plans to further market the new resort and gradually raise its average room rate during 2H14. Amer-group.com 7

8 Amer Group views a vibrant Hotels division as central to its communities. New openings this year will be in Porto South Beach, and Porto Tartous in Syria. Retail and Others LoB (3.6% of total 1H14 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. 1H13 1H14 Change Revenues (EGP mn) % Operating Profit (EGP mn) (36.1) (38.4) 6% -473% -189% -60% Recent Corporate Developments The Board of Directors voted to adopt the Chairman s proposal to raise the company s issued capital from EGP 547,145, to EGP 1,367,863,393.2 by utilizing the reserves and amending the par value of the share from EGP 0.12 to EGP 0.30 The Group restructured its shareholder structure in June 2014, which affected the ownership stake of Mr. Mansour Amer, the Group s Founder and Chairman, and an Egyptian endowment which supports funding for charity projects. 1Q14 Shareholder Structure 2Q14 Shareholder Structure % 35.18% % 6.78% 7.3% % 14.54% Mansour Amer Mohamed El-Amin Ragab Amer Wakf Ltd. SOL Global Holdings Ltd. Finby Estates Ltd. Free Float Lantess Internatinal Limited Mohamed El-Amin Ragab Amer Wakf Ltd SOL Global Holdings Ltd Finby Estates Ltd. Egyptian Wakf Ltd Free Float Amer-group.com 8

9 Income Statement 1H14 1H13 (EGP) (EGP) Change Revenue 674,802, ,568, % Cost of Revenue (414,820,767) (286,991,872) 44.54% Gross Profit 259,981, ,576, % Selling and Marketing Expenses (114,301,535) (57,042,245) % General and Administrative Expenses (97,674,467) (69,051,270) 41.45% Other Income 29,760,868 34,822, % Other Operating Expenses (31,550,569) (30,999,531) 1.78% Operating Profit 46,215,755 28,306, % Interest Income - - Finance Costs 12,686,070 (12,406,655) % Foreign Exchange Loss 7,367,535 21,068, % Company s Share in the Investment Sister Company - - Profit for the Year Before Tax 66,269,360 36,967, % Income Tax (21,884,089) (20,499,075) 6.76% Profit for the Year 44,385,271 16,468, % Amer-group.com 9

10 Balance Sheet 30 June 2014 (EGP) 31 December 2013 (EGP) Non-current assets Fixed assets 548,558, ,693,947 Projects under construction 359,633, ,978,049 Investment property assets 220,111, ,458,245 Intangible assets 1,242,403 2,863,315 Investment in associate 2,524,720 2,524,720 Foreign of joint projects 303,180, ,934,421 Restricted deposits due to units owners 485,282, ,202,082 Deferred tax liability 38,364,637 16,574,575 Total non-current assets 1,958,898,362 1,885,229,354 Current assets Development properties 3,376,983,683 2,936,940,547 Inventories 30,647,500 22,477,300 Accounts and notes receivable 144,239, ,657,136 Prepayments and other receivables 426,013, ,090,608 Bank balances and cash 1,010,680, ,006,966 Total current assets 4,988,565,746 4,356,172,557 Total Assets 6,947,464,108 6,241,401,911 Current liabilities Provisions 4,294,987 9,058,011 Bank overdrafts 48,440,808 49,120,773 Land purchase liability 31,100,311 32,365,419 Advanced from customers 3,653,894,173 2,986,458,074 Accounts and notes payable 268,944, ,155,341 Term loans 77,187, ,661,381 Income tax payable 38,809,734 42,983,464 Accrued expenses and other payables 498,285, ,361,490 Total current liabilities 4,620,958,050 3,778,163,953 Working Capital 367,607, ,008,604 Total Invested Funds 2,326,506,058 2,463,237,958 Financed as follows: Equity Share capital 547,145, ,763,571 Translation of foreign entity (1,890,616) (118,055) Legal reserve 73,523,307 60,823,440 General reserve 842,330, ,330,408 Other reserve 14,298,665 14,298,665 Retained earnings 286,579, ,371,926 1,761,986,552 1,920,469,955 Equity attributable to owner of the company 1,761,986,552 1,920,469,955 Minority Interest 10,181,487 (2,385,897) Total Equity 1,772,168,039 1,918,084,058 Non-current liabilities Term loans 56,606,621 76,825,825 Land purchase liability 12,448,981 14,125,993 Deposits due to units owners 485,282, ,202,082 Total non-current liabilities 554,338, ,153,900 Total Shareholders Equity and Long Term liabilities 2,326,506,058 2,463,237,958 Amer-group.com 10

11 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 11