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An Increase in Profits Amounting to 80%: PADICO Holding Announces USD 40.6 Million Profits in 2009
 

Masri: Results are excellent and reflect our clear investment strategy
Hulileh: Restructuring steps will raise profits and balance PADICO Holding’s sources of income

Ramallah, 15 February 2010: Palestine Development and Investment Ltd. (PADICO Holding) announced that 2009 net profits attributable to shareholders amounted to USD 40.6 million, compared to USD 22.5 million in 2008, marking a significant rise of 80%.

Announcing these profits in a press conference held in the city of Ramallah on February 15, 2010, Mr. Munib R. Masri, Board Chairman of PADICO Holding, welcomed the positive results the Company has achieved. Describing them as excellent, Mr. Masri said that these results reflect PADICO Holding’s clear investment strategy and significant procedures and steps taken on more than one level, including in relation to restructuring companies and investing in new sectors. Over the upcoming period, Mr. Masri also confirmed that PADICO Holding will continue to make steady and deliberate progress and will look for feasible investment opportunities, which contribute to promoting the Palestinian national economy.

Restructuring plan is progressing smoothly and in line with the set timetable
Mr. Masri asserted that PADICO Holding has made a considerable progress over 2009 in implementing the plan of restructuring its investments. To this effect, PADICO Holding concluded a number of important transactions, particularly purchasing the whole share of the Kuwaiti Global Investment House in Palestine Real Estate Investment Company (PRICO) and in Palestine Securities Exchange Company (PSE). Additionally, the process of converting PSE into a public shareholding company was successfully completed. PADICO Holding has also finalised major preparations to merge subsidiary and affiliate companies, which operate in the real estate and tourism sectors. The process is expected to be accomplished by the end of the first half of 2010.

In the largest swap and purchase transaction carried out by the Company, Mr. Masri said that PADICO Holding sold its shares in the Golden Wheat Mills Company (GMC) and National Carton Industry (NCI) to Palestine Industrial Investment Company (PIIC). The transaction also included selling Palestine Industrial Estate Development Company (PIEDCO Holding) shares in GMC to PIIC. Consequently, PADICO Holding has focused its industrial investments in a relevant, specialised holding company.

USD 100 million for investment in infrastructure sectors over the next three years
Mr. Masri announced that PADICO Holding has started to implement the Board’s decision on investing more than USD 100 million over the upcoming three years in the sectors of water and wastewater, solid waste recycling, agriculture, tourism, and real estate in Jerusalem. Many practical measures have been in place. Of these, PADICO Holding signed memorandums of understanding (MoUs) with the Palestinian National Authority and with other investors for an initial public offering for establishing an electricity generation company in northern West Bank. In addition, PADICO Holding incorporated a new solid waste recycling company in Nablus. It also signed an MoU with the Jenin Municipality to construct a wastewater treatment plant and the use of treated wastewater for agriculture purposes. In relation to investments, PADICO Holding inaugurated the Al Hamra Palace in the city of Jerusalem in 2009. Currently, PADICO Holding is implementing a project to restore and manage St. George International Hotel as well as to construct a housing project in the village of Beit Safafa.

Registration of PADICO Holding in Palestine
Mr. Masri confirmed that PADICO Holding has taken a series of steps that will further deepen its attachment to the Palestinian homeland, thereby reflecting the Company’s strategic commitment to investing in Palestine and building cooperation relationships with the Palestinian Government and the Ministry of National Economy. Mr. Masri also stated that PADICO Holding’s registration in Palestine will invigorate the Company’s operation and promote public confidence in its performance and investments. Highlighting that PADICO Holding runs long-term investments, its registration will attract more foreign investments to Palestine.

Financial indicators witnessed tangible progress on all levels
Mr. Samir Hulileh, CEO of PADICO Holding, said that the 2009 financial indicators have witnessed tangible progress in all areas. The rise in profits has mainly resulted from the increase of PADICO Holding’s revenues from USD 59.8 million in 2008 to USD 84.9 million in 2009, a rise of 42%. Mr. Hulileh stated that revenues accrued from affiliate and subsidiary companies constituted the majority of PADICO Holding’s proceeds. These amounted USD 60.2 million, 71% of the total revenues.

Restructuring steps will raise profits and balancing PADICO Holding’s sources of income
Over the upcoming stage, Mr. Hulileh affirmed that PADICO Holding will focus on creating new and diversified sources of income by restructuring its investments in tourism, real estate and industry sectors and entering in new investments, thereby upsizing profits and contributing to building a strong and productive national economy. Additionally, PADICO Holding will pay more attention to investing in financial portfolios in the Palestinian market through its subsidiary Rawan International Investment Company in order to promote public trust and support the market liquidity. PADICO Holding will discuss with supervisory bodies the possibility of issuing corporate bonds. To this avail, Mr. Hulileh called on the Ministry of National Economy and Palestine Capital Market Authority (PCMA) to create an enabling investment and legal environment to complete this process. According to Mr. Hulileh, the growth of 2009 profits and total indicators are a start of a new stage in the PADICO Holding’s life cycle, the results of which will manifest over the upcoming years. Restructuring procedures and new investments initiated by the Company reaffirm PADICO Holding’s pivotal mission and commitment to investing in promising economic sectors in Palestine.

Improved performance in PADICO Holding’s share
Mr. Hulileh announced that the efforts made by PADICO Holding’s Board and Executive Management has been evidently fruitful. Over the past month, PADICO Holding’s share has improved, thereby reflecting the strength of Company’s share despite the fact that it is currently traded at a price below its fair value. Still, Mr. Hulileh confirmed that indicators show that the share is going in an upward trend.

Preparations to take part in Palestine Investment Conference and in a promotional tour in London
As part of its effort to attract foreign investments into Palestine, and with its commitment to support and participate in economic conferences and activities, which may promote the Palestinian national economy, Mr. Hulileh said that PADICO Holding is now preparing to take part in the Palestine Investment Conference, which will be held in the city of Bethlehem in early June 2010. PADICO Holding will support the Conference, participate in its session, and present a number of investment projects. Mr. Hulileh also announced that PADICO Holding is currently making arrangements to take part in a promotional tour in London next month. Organised by PSE, most prominent private sector corporations, which are listed on the PSE, as well as a number of brokerage companies will participate in the tour. Meetings will be held with a number of UK and regional institutional investors.

Promoting partnership between the public and private sectors
Mr. Hulileh asserted that PADICO Holding will act towards promoting partnerships between the public and private sectors by taking part in new economic projects, particularly in the infrastructure sector. These will enhance the quality of public service delivery and reduce service cost. In this context, PADICO Holding will support and participate in the conference, which the Ministry of Local Government intends to hold by the end of this year. In this event, investment projects hosted by local government units will be presented to the private sector with the aim to create real partnerships that will stimulate and support the Palestinian national economy.

A growth of 80% in the net income
Marking a rise of 80%, the 2009 net profit attributable to PADICO Holding shareholders was USD 40.6 million compared to USD 22.5 million in 2008. The increase is mainly a result of the 42% growth of PADICO Holding’s revenues from USD 59.8 million in 2008 to USD 84.9 million in 2009. At the same time, PADICO Holding’s expenses rose from USD 36.1 million to USD 44.5 million or by 23%, which is less than the rise in the total revenues.

Revenues accrued from affiliate and subsidiary companies
Subsidiary companies’ sales and operational revenues rose from USD 26.3 million in 2008 to USD 31 million in 2009, i.e. by a total 18%. Compared to USD 39.5 million in 2008, PADICO Holding’s share from net profits of its affiliates dropped to USD 29.1 million (or by 26%) in 2009. This was mainly due to PADICO Holding’s declining share from the net profits of Palestine Telecommunications Group (PALTEL). After it had taken general provisions, PALTEL’s profits dropped from JD 89 million in 2008 to JD 70 million in 2009.

Revenues from affiliates and subsidiaries make up the majority of PADICO Holding’s revenues. These amounted to USD 60.2 million or 71% of the total revenues. Added to this is a profit of USD 15.4 million, which was generated due to consolidation of PRICO’s operations, representing the profits generated by PADICO Holding’s acquisition of the additional share in PRICO. Accordingly, PADICO Holding’s ownership in PRICO rose from 37.75% to 70.87%.
In addition, the loan recovery of USD 6.4 million, which was granted to subsidiaries and affiliates, has been reflected after a portion of these loans were settled in 2009 within the framework of restructuring Palestine Tourism Investment Company (PTIC).

Profits of the financial assets portfolio
Compared to losses of USD 8.1 million in 2008, the profits of the PADICO Holding’s financial portfolio reached USD 340,000. It should be noted that the volume of PADICO Holding’s financial portfolios (financial assets for trading) dropped from USD 25.5 million in 2008 to USD 18.2 million in 2009, constituting 3% of the total assets.

Applying the new International Financial Reporting Standard (IFRS) 9
PADICO Holding has early adapted IFRS 9 to its consolidated financial statements of 2009. Accordingly, all profits and losses accrued from available-for-sale investments (financial assets at fair value through comprehensive income) were listed, excluding cash dividends from these investments, which are disclosed in the income statement within dividends of the financial assets portfolio.

In consistence with IFRS 9, all available-for-sale investments appear at fair value, regardless of whether they are listed on financial markets or not. It has no longer been possible to reveal any investments in securities at the cost or book value. As a result, unrealised losses of USD 8.8 million, generated from assessment processes, were disclosed in the consolidated statement of comprehensive income.

Assets and investments
Increasing by 17%, PADICO Holding’s assets rose from USD 536.1 million at the end of 2008 to USD 624.9 million at the end of 2009.

This rise is mainly attributed to the consolidation of PRICO’s financial statements in 2009. The rise is reflected in the items of real estate investment, machinery and equipment, projects in progress, and intangible assets; noting that those items increased by USD 121.1 million.

In contrast, investment volume in affiliate companies dropped from USD 330.9 million to USD 308.1 million, a decline of USD 22.8 million, due to the reclassification of PRICO from an investment in an affiliate to a subsidiary.

Liabilities and Equity
Total Liabilities rose from USD 151 million as of 31 December 2008 to USD 192.5 million on 31 December 2009, an increase of USD 41.5 million, or 28%. This increase is mainly a result of a rise in loans and credit facilities by USD 41.8 million, which increased by 32% or from USD 129.9 million at the end of 2008 to USD 171.7 million at the end of 2009. Thereby, debt ratio rose from 34% to 40%. It should be noted that loans include the debt of PADICO Holding and that of its subsidiary companies.

At the same time, shareholders equity increased from USD 347 million to USD 365.2 million, or by 5%, as a result of the 2009 profits of USD 40.6 million and after the deduction of the dividends of USD 15 million, which were distributed to shareholders for 2008. This also includes the USD 8.8 million unrealised losses of financial investments disclosed in the statement of comprehensive income, as is mentioned above.

As a major consequence of the consolidation of PRICO’s financial statements, minority interest jumped from USD 38.1 million to USD 67.2 million, a rise of USD 29.1 million.


Improved financial indicators
In 2009, most financial indicators and ratios improved. Representing 80%, EPS rose from 9 cents in 2008 to 16 cents in 2009. Also, the ROE increased from 6.6% to 11.4%, and so did the ROA from 5% to 6.9%.

BV per share also increased to USD 1.46. In contrast, the P/BV ratio dropped by 0.81 times and P/E ratio decreased to 7.33x in comparison to 13.44x at the end of 2008, clearly indicating the low price levels at which the share is being traded at the financial market.

 

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