Makkah & Madinah Holdings Ltd.
("MMH" or the "Company")
Re: Financial Results for the Year Ended 31-12-2013
Highlights for 2013
* Carrying value of MMH's investment in MMCI at 31 December 2013 was $472.79
million; an increase over the year of $32.43 million (7.4 per cent) and,
since acquisition in May 2012, of $72.79 million (18.2 per cent)
* MMH's net profit for 2013 was $25.41 million; basic and fully-diluted
earnings per share were ยข2.00
* MMCI's net asset value on 31 December 2013 was $1.388 billion compared with
$1.174 billion on the date of MMH's acquisition of its 34.12 per cent
interest in MMCI
* MMCI's real estate assets are focused on the Western region of KSA - Jeddah
and Makkah
Chairman's Statement
As Chairman of Makkah & Madinah Holdings Limited (the "Company" or "Group" or
"MMH"), I would like to present the Company's Annual Report for 2013. I am
pleased to record that the Company has maintained a profitable performance for
the second consecutive year, generating a comprehensive income of $32.49
million for the financial year ended 31 December 2013 (2012: $39.96 million).
During the financial year ended 31 December 2013, the Company has focused on
two main priorities: providing consultancy services to finance its operating
expenses and identifying new business investment opportunities to build
shareholder value through capital appreciation and/or additional revenue
streams.
Shareholders will know from previous announcements that, in 2012, the Company
acquired a 34.12 per cent interest in Makkah & Madinah Commercial Investment
Company JSC ("MMCI"). MMCI operates in the Kingdom of Saudi Arabia ("KSA") with
investments in the fast-expanding KSA real estate market. Since acquisition,
the value of this investment in MMCI has grown by 18 per cent from $400 million
to $472.79 million.
The Company's interest in MMCI continues to produce positive results as the KSA
real estate sector shows continued growth against a backdrop of strong
macroeconomic fundamentals. MMCI's portfolio has seen a generalised
appreciation in land values, confirmed by the latest independent valuation as
at 31 December 2013.
The Company continued to develop its advisory and consultancy services. During
the year under review, the Company entered into a consultancy agreement with a
third party.
Financial results
The Group has posted net profits of $25.41 million (2012: $29.35 million),
mainly derived from the share of profits from MMCI. In addition, the Company
derived revenues of $2.29 million (2012: $1.95 million) from its advisory and
consultancy services described above.
The positive result in the Statement of Comprehensive Income has resulted in
basic earnings per share ("EPS") of $0.020 (2012: $0.023).
At 31 December 2013, net assets of the Company were $472.36 million (2012:
$440.41 million) or $0.37 per share (2012: $0.35).
Business overview
As reported in my interim statement for the period ended 30 June 2013, when the
Company evaluated certain regional markets to focus its investment strategy,
the KSA market appeared to have strong fundamentals, with a fast-growing
population and increased demand for housing, a strong upward trend in tourism
and significant backing from the government of KSA to develop its
infrastructure and services.
To evaluate the development opportunities associated with MMCI's land bank, the
Company commissioned an independent, internationally-known real estate
consultancy firm to conduct a study on the real estate markets of Makkah and
Madinah and an analysis of investment strategy regarding vacant development
lands in Makkah and Madinah, in order to assess the existing development
opportunities within MMCI's land portfolio. The study supports that the
investment in Makkah and Madinah is a safe investment for investors who would
like to protect their capital investment especially with the uncertainty of
international markets.
Following the further analysis of an investment strategy regarding vacant
development lands in Makkah and Madinah, the consultants evaluated various
investment options including the disposal / development of the land bank
currently in MMCI's assets portfolio.
In the Company's view, the MMCI business model of the sale and purchase of
lands can be further strengthened by the development of land to improve
returns. The study will form a basis for the development strategy going
forward. The Board and management remain positive and are committed to
exploring all prospective avenues available to succeed in generating strong
returns for shareholders.
Current Trading and Outlook
Trading since the end of 2013 has been in line with the Directors'
expectations. In addition to working closely with our associate company, MMCI,
to ensure the furtherance of its property investments in KSA, the Board has
also been considering other investment opportunities outside KSA but within the
Gulf Cooperation Council ("GCC") countries. When negotiations on any major
project in another GCC country are satisfactorily concluded, the Company will
inform the market as appropriate. Moving forward, we shall continue to rely on
our own actions to generate incremental shareholder value.
The Directors continue to actively evaluate and implement measures to increase
the Company's profile in ways which they believe will benefit shareholders.
Board Appointment
Most members of the Board of Directors have been in office since the Company's
readmission in 2011 to ICAP Securities and Derivatives Exchange ("ISDX")
(formerly PLUS Markets). During 2013, the Board appointed Mr. Ahmed Iqbal
Bangee (previously non-executive) as an executive Director and as Chief
Financial Officer.
Impending, Post- Balance Sheet Changes
Mr. Abdulla Saeed Abdulla Mohamed Brook Al Hamiri and I shall be stepping down
from the Board of MMH, Prime Investments Group Limited and MMCI at the
forthcoming Annual General Meeting of shareholders, convened for the purpose of
approving these report and accounts. It is proposed that Mr. Khaled Alhusseini
and Mr Khaled Majdalani (who have signified their willingness to serve as
Directors of the Company) shall be joining the Board of MMH and that their
appointments and elections shall coincide with Mr. Al Hamiri's and my own
retirements from the Board.
I believe that the incoming Directors are admirably qualified to guide the
Company forward in relation to its investment in KSA, to its broader, regional
strategy and, in the case of Mr. Majdalani to ensuring along with Dr. Abdulaziz
Alongary that due weight is given to the interests of minority shareholders.
It is intended that Mr. Khaled Alhusseini shall succeed me as non-executive
Chairman of the Board.
Key information on the Proposed Directors
Mr. Khaled Alhusseini is a Saudi national and a marketing and management
executive with combined experience of twenty-one years in the real estate and
petrochemical industries. He has extensive knowledge of real estate development
and market research activities. Mr. Alhusseini holds a B. Sc. in statistics
from King Saud University.
Since 2010, Mr Alhusseini has been the Chief Executive Officer of MMCI. He also
sits on the boards of MMCI's subsidiary companies. In this capacity, he has
overseen over the past four years all MMCI's real estate transactions and he
has played a pivotal role in making MMCI one of the larger real estate
companies in Makkah and Madinah.
Mr. Khaled Majdalani is a British citizen, a civil engineer by profession and
is currently the Middle East Regional Director of Campbell Reith Hill
International ("CRH"). Mr Majdalani was educated in the United Kingdom and the
USA, earning his degree in Civil Engineering from Syracuse University in New
York State. In his current position, Mr. Majdalani has worked on many
development and infrastructure projects in the Levant, the Gulf region
including the UAE and in Central Asia.
Other Appointments
The Company appointed Keith Bayley Rogers & Co Limited ("KBR") as the Corporate
Adviser and stockbroker effective from 1st March 2014. KBR is a member of the
London Stock Exchange and of ISDX.
Recommendation
The Directors of the Company consider that all the proposals to be considered
at the AGM are in the best interests of the Company and recommend shareholders
to vote in favour of them as they intend, where relevant, to do in respect of
their own shareholdings.
Conclusion
The future focus for the Company will be to manage any significant risk factors
that might affect the Company's performance and future operations, to maintain
strong corporate governance and transparency and to create the environment for
improved liquidity in the Company's shares. The business is progressing in a
positive manner and we are in a position to take advantage of opportunities
over the coming year. The management of the Company will work actively to
secure MMH's continued, positive business performance. Finally, I wish to thank
all our shareholders and the management team for their support during the past
year.
Chairman
Dr. Noor Aldeen S. A. Atatreh
27 May 2014
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2013
Year ended Year ended
31 December 31 December
2013 2012
(Restated)
Note USD USD
Revenue 2,289,918 1,948,229
Employee costs (322,858) (1,365,812)
Other operating expenses (578,910) (853,868)
Legal and professional fees (1,276,785) (2,102,388)
Change in fair value of investment - 1,994,942
property
Impairment of available-for-sale - (123,257)
financial assets
Depreciation (7,646) (1,951)
Operating profit/(loss) 103,719 (504,105)
Share of profit from associate 25,353,976 29,867,629
Finance expense (47,140) (18,044)
Profit for the year 1 25,410,555 29,345,480
Other Comprehensive income
Recycle of prior period - 123,257
available-for-sale financial assets
losses
Share of fair value change of 1 7,078,900 10,487,840
associate's available for sale
investment
Total comprehensive income for the year 32,489,455 39,956,577
Earnings per share attributable to the
equity holders of the parent during the
year
Basic earnings per share for the year 2 0.0200 0.0232
Diluted earnings per share for the year 2 0.0200 0.0229
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013
2013 2012
USD USD
ASSETS
Non-current assets
Property, plant and equipment 24,641 30,597
Investment in associates 472,788,345 440,355,469
472,812,986 440,386,066
Current assets
Trade receivables 224,523 631,471
Prepayments, advances and other 770,574 797,336
receivables
Cash and cash equivalents 340,134 460,934
1,335,231 1,889,741
Total assets 474,148,217 442,275,807
EQUITY
Capital and reserves attributable to the
equity holders of the company
Ordinary shares 10,226,655 10,220,614
Share premium 395,146,685 395,001,706
Reverse acquisition reserve 1,636,894 1,636,894
Available for sale financial asset reserve 17,566,740 10,487,840
Retained earnings 47,784,826 23,057,946
472,361,800 440,405,000
LIABILITIES
Current liabilities
Trade and other payables 1,786,417 1,870,807
Total liabilities 1,786,417 1,870,807
Total equity and liabilities 474,148,217 442,275,807
The financial statements were approved by the Directors on 27 May 2014 and were
signed on their behalf by:
Mr. Muin El Saleh
DIRECTOR
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013
Share Share Reverse Available Retained Total
capital Premium acquisition for sale Losses
reserve financial (Restated)
assets
reserve
(Restated)
USD USD USD USD USD USD
As at 1 January 10,210,843 394,835,588 2,591,217 (123,257) (9,628,513) 397,885,878
2012
Transactions with
owners
Exercise of 9,771 166,118 - - - 175,889
warrants
Capital - - - - 1,702,981 1,702,981
contribution
Transfer of - - (954,323) - 954,323 -
reserves
10,220,614 395,001,706 1,636,894 (123,257) (6,971,209) 399,764,748
Profit for the year - - - - 29,345,480 29,345,480
Share based payment - - - - 683,675 683,675
Share of fair value - - - 10,487,840 - 10,487,840
change of
associate's
available for sale
investment
Other comprehensive - - - 123,257 - 123,257
income - recycle of
available-for-sale
financial assets
losses
At 31 December 2012 10,220,614 395,001,706 1,636,894 10,487,840 23,057,946 440,405,000
At 1 January 2013 10,220,614 395,001,706 1,636,894 10,487,840 23,057,946 440,405,000
Transactions with
owners
Shares issued 6,041 144,979 - - - 151,020
10,226,655 395,146,685 1,636,894 10,487,840 23,057,946 440,556,020
Profit for the year - - - - 25,410,555 25,410,555
Share based payment - - - - (683,675) (683,675)
Share of fair value - - - 7,078,900 - 7,078,900
change of
associate's
available for sale
investment
At 31 December 2013 10,226,655 395,146,685 1,636,894 17,566,740 47,784,826 472,361,800
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013
Year ended Year ended
31 December 31 December
2013 2012
(Restated)
USD USD
Profit for the year 25,410,555 29,345,480
Adjustments for non-cash items:
Professional fees settled by issue of 151,020 175,889
ordinary shares
Share based payment expense (683,675) 683,675
Share of profit from associate (25,353,976) (29,867,629)
Change in fair value of investment - (1,994,942)
property
Impairment of available-for-sale - 123,257
financial assets
Depreciation 7,646 1,951
Working capital changes:
Trade and other receivables 433,710 (1,300,363)
Trade and other payables (84,390) 1,205,400
Cash used in operations (119,110) (1,627,282)
Cash flows from Investing activities
Purchase of property, plant and (1,690) (32,548)
equipment
Net cash used in investing activities (1,690) (32,548)
Cash flows from Financing activities
Capital contribution - 1,702,981
Net cash generated from financing - 1,702,981
activities
Net (decrease)/increase in cash and (120,800) 43,151
cash equivalents
Cash and cash equivalents at beginning 460,934 417,783
of the year
Cash and cash equivalents at end of the 340,134 460,934
year
Basis of preparation
The financial information does not constitute the Group's financial statements
for either the period ended 31 December 2013 or the year ended 31 December
2012, but is derived from those accounts. The Group's non statutory accounts
for 2013 are available from the Company's website from 28 May 2014. The
auditor's reports on both the 2012 and 2013 accounts were unqualified; did not
draw attention to any matters by way of an emphasis; and did not contain any
statement in regard to matters reported on by exception.
The financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the European Union and
IFRIC interpretations. The financial statements have been prepared under the
historical cost convention, except for those financial assets and financial
liabilities that are measured at fair value as stated in the accounting
policies. The accounting policies used are consistent with those applied in the
2012 annual financial statements and those that were applied in the 2013
financial statements.
1. Restatement of Comparatives
In the 2012 financial reporting period, the profit from associate incorrectly
included the Company's share of the fair value change of the associate's
available for sale investment when this amount should be reflected in other
comprehensive income. The comparatives have been amended to reflect this and
the earnings per share have been duly corrected.
2. Earnings per share
a. Basic
Basic earnings per share are calculated by dividing the profit attributable to
equity holders of the parent by the weighted average number of ordinary shares
in issue during the period.
2013 2012
(Restated)
Profit attributable to equity holders of the 25,410,555 29,345,480
parent (USD)
Weighted average number of ordinary shares in 1,267,623,920 1,266,541,010
issue
b. Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
ordinary shares. The company has two categories of dilutive potential ordinary
shares: share warrants and share options. For the share warrants and share
options, a calculation is performed to determine the number of shares that
could have been acquired at fair value (determined as the average annual market
share price of the Company's shares) based on the monetary value of the
subscription rights attached to outstanding share warrants and share options.
The number of shares calculated as above is compared with the number of share
that would have been issued assuming the exercise of the share warrants and
share options.
2013 2012
Profit attributable to equity holders of the 25,410,555 29,345,480
parent (USD)
Weighted average number of ordinary shares in 1,267,623,920 1,266,541,010
issue
Adjustments for:
Assumed conversion of share warrants - 1,390,618
Assumed conversion of share options - 14,022,527
Weighted average number of ordinary shares for 1,267,623,920 1,281,954,155
diluted earnings per share
Dubai, 27 May 2014
This announcement has been made after due and careful enquiry and the Directors
accept responsibility for its content.
Enquiries:
Makkah & Madinah Holdings Limited:
Victoria Arscott, Investor Relations Manager: tel: +971 (0)4 423 9033; e-mail:
[email protected]; further information on Makkah & Madinah Holdings Limited is
available from the Company's website: www.mm-holdings.com/
Keith Bayley Rogers & Co. Limited:
Graham Atthill-Beck: tel: +44 (0)20 7464 4092; mobile: +971 (0)50 856 9408;
e-mail: [email protected]
Hugh Oram: tel: +44 (0)20 7464 4096; e-mail: [email protected]
Copies of the Annual Report for the year ended 31 December 2013 are available
during normal business hours for a period of one month from the date of this
announcement, by arrangement, from the offices of Keith Bayley Rogers & Co.
Limited, No. 1 Royal Exchange Avenue, London, EC3V 3LT. A soft copy of the
Annual Report is also downloadable from the Company's website:
www.mm-holding.com/