Palm Hills Developments continues to regain solid grounds with strong financial results for third quarter 2009

PHD is listed on the Egyptian Stock Exchange and on the London Stock Exchange (LSE).

Highlights

- Total Reservations were ahead of management expectations at EGP1.2bn ($220m) in Q3 2009, an increase of 147% from Q2 2009 of EGP472m ($86m) and an increase of 23% from Q3 2008 of EGP952m ($174m).

- Gross contracts signed in Q3 2009 increased 15% in value to EGP924m ($169m) compared with EGP807m ($148m) in Q2 2009 and increased 27% compared with EGP729m ($133m) in Q3 2008.

- PHD's customer base increased to 5,400 clients, representing a 27 % increase from December 31st 2008, benefiting from a deliberate widening of the product and pricing range to attract new customers.

- Further good progress against a background of continuing uncertain world economic conditions. Net Sales in Q3 2009 recorded strong growth of 25% to EGP303m ($55m) over EGP242m ($44m) in Q2 2009.

- Net operating profit for Q3 2009 increased by 70% to EGP180m ($33m) compared to EGP106m ($19m) in Q2 2009. The growth in our operating profits reflects increased revenues and a strong and successful focus on cost control

- Gross profit increased by 59% to EGP220m (US $40m) in Q3 2009, compared to EGP138m ($25m) in Q2 2009.

- SG&A reduced 28% in absolute terms, down from EGP133m ($24m) in Nine Months 2008 to EGP96m ($18m) in Nine Months 2009.

- EBITDA for Q3 2009 recorded a significant increase of 69% compared to Q2 2009 to reach EGP182m ($33m), with EBITDA margin reaching 60%.

- Net Profit for Q3 2009 recorded strong growth of 38% over Q2 2009 to reach EGP133m ($24m). Total Nine Months 2009 net profit before minority reached EGP342m ($63m).

- Total land bank remained at 48.8m sqm.

- Bank Debt: Equity 2: dropped from 21% at 30/9/2008 to 20% at 30/9/2009.

1 Based on EGP/US% 5.4665
2 (Bank Overdrafts + Term Loans) / Total Equity

Operational Performance

Cumulative reservations reached EGP9.1bn (approximately $1.7bn) at September 30 2009. Net sales and operating profit for the nine months period reached EGP675m ($123m) and EGP364m ($67m) respectively

PHD demonstrated further good progress in Q3 2009 despite the background of continuing uncertain world economic conditions. The gross value of contracted units amounted to EGP924m ($169m), compared with EGP807m ($148m) in Q2 2009 and with EGP729m ($133m) in Q3 2008.

Gross Reservation for Q3 2009 saw a significant increase of 147% to EGP1.2bn ($220m) compared with EGP472m ($86m) in Q2 2009. Gross cancellations were at their lowest for four quarters, with EGP305m ($56m) of cancellations in Q3 2009 as opposed to EGP373m ($68m) and EGP625m ($114m) in Q2 2009 and Q1 2009 respectively, an early indication that the market is regaining momentum. Gross Contracts increased by 15% from Q2 2009 and by 27% from Q3 2008.

PHD continued to demonstrate that it has the flexibility and resources to respond quickly to benefit from new market demands. The success of our Hacienda Bay (Zone 1) project lead us to quickly launch Hacienda White (Zone 1) in Q3 2009, and this development, primarily for second home owners, is already 100% sold, this further demonstrates the success of our strategy in investing in the North Coast Area.

PHD has responded to market conditions by widening its product and pricing range to attract new customers. This has included smaller unit sizes at more affordable prices. Reflecting this, the average unit sales price during the period was EGP1.2-1.3m, approximately 20% less than 2007/8 prices, and the minimum value of inventory offering has been lowered to EGP0.5m. We have also flexed payment terms, with a reduced 5% deposit for reservations.

These moves have had a positive impact on sales without diluting the quality of PHD's business, and demonstrate that demand continues for the right products.

PHD is also in the process of opening new sales offices in Europe (London) and the Gulf regions. This will expand our distribution network and will enhance our ability to generate new clients in these territories.

Financial Performance

With strong revenue growth and a significant increase in net profit figures over Q2 2009, PHD's results for the third quarter of 2009 outperformed expectations.

The increase in net sales is mainly attributed to:
1) The outperformance of our second homes sales, especially in the North Coast Area, where the total recognized land sales revenue from Hacienda Bay (Zone 1) and Hacienda White (Zone 1) reached EGP132m ($24m);
2) The continued progression of reserved units in the Golf and Golf Extension projects into actual contracts, amounting to EGP245m ($45m) with recognized land sales revenue of EGP61m ($11m) and EGP77m ($14m) respectively.
3) The increase in the net contracted units of the Katameya project by 193% from Q2 2009, with recognized land sales revenue of EGP25m ($5m).

PHD continued to focus on tight control of SG&A expenses, with SG&A as a percentage of net sales decreasing to 12.3% from 12.5% in Q2 2009.

EBITDA increased significantly in absolute terms by 69% in Q3 2009 to reach EGP182m ($33m) from EGP108m ($20m) in Q2 2009. EBITDA margins improved to 60% of net sales.

Net Profit for Q3 2009 showed significant growth of 38% over Q2 2009, with Net Profit before Minority for Nine Months 2009 reaching EGP342m ($63m).

Land Bank

PHD's strategy is to focus primarily on the execution of its existing projects and developing its sizable land bank, utilizing the current favorable cost saving conditions, boosting EBITDA margins and decreasing construction costs. Nonetheless, PHD will remain diligent regarding the pursuit of unparalleled land acquisition opportunities that complement its existing developments.

Outlook

With one of the largest populations amongst developing countries in need of adequate housing, an expanding economy and a fast developing infrastructure base, the Egyptian real estate market continues to offer PHD exciting opportunities for sustained growth.

We are benefiting from our strong business focus, careful management of all our resources and unmatched presence in the Egyptian market. We continue to develop the Group's current operations while carefully reviewing opportunities for the future. PHD is very well placed to continue to generate good growth during the rest of this year and beyond.

Yasseen Mansour, Chairman and Chief Executive Officer of PHD, said:

"Our good performance against a background of recent very challenging world economic conditions has been based on our detailed understanding of our markets, our strong business model, experienced management team and robust funding platform. The long term dynamics of our marketplace remain healthy and we are well placed to make continued good progress."