MAKKAH & MADINAH HOLDINGS LIMITED
("MMH" or the "Company")
Interim Financial Results for the Period from 1 January 2013 to 30 June 2013
Highlights for 2013
* Carrying value of Makkah & Madinah Holdings Limited ("MMH") investment in
Makkah & Madinah Commercial Investment Co. ("MMCI") at 30 June 2013 was
$459.25 million; an increase of $59.25 million (15%) since acquisition in
May 2012.
* MMH's comprehensive income for the six months period ended 30 June 2013 was
$19.00 million compared to $2.24 million in the comparative period of 2012.
* MMCI's net asset value on 30 June 2013 was $2.06 billion compared to $1.84
billion on the date of MMH's acquisition of the 34.12% stake.
* MMCI acquired a further stake in the Jebal Al Noor Company increasing its
total interest in the Jebal Al Noor land asset from 49.5 per cent to 99.5
percent.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present Makkah & Madinah Holdings Limited's (the "Company",
"Group" or "MMH") financial results for the first half of 2013. These results
have not been audited but have been reviewed by the Company's auditor. These
continue the positive trend begun in the same period of last year and during
the second half of 2012; the outlook for the real estate and development market
in Saudi Arabia remains promising.
Financial Results
Comprehensive income for the six month period ended 30 June 2013 was $19.00
million (H1, 2012: $2.24 million), giving rise to diluted earnings per share of
1.3 US cents (H1, 2012: 0.2 US cents). This income derived mainly from the
$18.89 million contribution of profits attributable to its associate, Makkah &
Madinah Commercial Investment Company JSC (MMCI), of which MMH currently owns
34.12%.
An increase in the value of MMH's investment in MMCI by 15 percent to $459.25
million resulted in net assets standing at the end of the period at $458.72
million (H1, 2012: $401.40 million); or US cents 36 per share (H1, 2012: US
cents 32 per share).
Review of the Company's Activities
In 2012, when the Company evaluated certain regional markets to focus its
investment strategy, the Saudi Arabian market appeared to have strong
fundamentals, with a fast growing population and increased demand for housing,
strong upward trend in tourism and significant backing from the government to
develop its infrastructure and services. This view appears to have been
vindicated by increases in earnings and the asset value of the investment in
MMCI.
In light of the proposed development plans for the land of 128,391.70 m2 at
Jebal Al Noor owned by Jebal Al Noor Company, MMCI took a commercial decision
during the period under review to increase its stake from 49.5% to 99.5% in
Jebal Al Noor Company, allowing MMCI to gain control over this iconic
development, which is at the foot of the Ghar Hera mountain near Makkah.
The Group continues to evaluate new investment opportunities, including that of
potentially increasing its investment in its present associate company, MMCI.
Significant management effort during the recent period has been devoted to
identifying a suitable alternative forum for listing, to increase its
visibility to a wider investor base and to address the restricted liquidity
which has characterised trading in the Company's shares to date on the ISDX
Growth Market.
During the last six months, the Company has progressed with this process and
has maintained regular dialogue with the relevant listing authorities through
its financial advisers.
Current Trading and Outlook
The performance of MMCI in which the Company has an investment, during the
second half of 2013 to date is in accordance with the Directors' expectations.
The Directors and the executive management team continue to focus on
determining the optimum solution to increasing the Company's profile and
improving liquidity in the market for its shares. They remain committed to the
objective of positioning Makkah & Madinah Holdings on a platform, which will
support its future growth as a prominent, Shari'ah-compliant real estate
investment company.
Conclusion
I look forward to communicating with shareholders as appropriate to inform them
of progress with the matters discussed above and to presenting in due course
the financial results for the full year 2013.
I would like to convey my sincere gratitude to all shareholders for their
continued support, and to our management and the Board, as we continue to build
this strong foundation for the Company.
Chairman
Dr. Noor Aldeen S. A. Atatreh
25 September 2013
COMPANY OVERVEIW
Makkah & Madinah Holdings Ltd (the "Company" or "Group" or "MMH") is a
registered offshore company incorporated in the Commonwealth of Bahamas under
registration number 148728B.
The Company has an issued share capital of 1,268,049,125 ordinary shares and is
quoted on the ISDX Growth Market of ICAP Securities and Derivatives Exchange
Stock Exchange ("ISDX"). ISDX was previously known as PLUS SX.
Previously, the Group's portfolio comprised of real estate and hospitality
assets located in the United Arab Emirates. These assets were sold in May 2012
in a transaction that would mark a new beginning for the Company, with a new
brand and a shift in its regional market focus to the Kingdom of Saudi Arabia
("KSA").
The transaction resulted in the Company selling its existing property portfolio
and acquiring a 34.12 percent indirect interest in Makkah & Madinah Commercial
Investments Company ("MMCI"). MMCI operates in the KSA, with investments in the
higher growth KSA real estate market, particularly in Makkah and Madinah. This
investment was undertaken with the aim of creating a more robust future for the
Company.
Since its incorporation in 2005, MMCI, a real estate and development investment
company headquartered in Jeddah, has proven successful in the acquisition and
sale of real property assets in the KSA, with its current property portfolio
valued at $1.95 billion as of 30 June 2013.
The Company's extensive knowledge in property development and strong commercial
ties with MMCI have opened the doors to multiple development opportunities in
Saudi Arabia that the Company continues to explore, with the aim of generating
significant returns and value for shareholders.
The Company maintains its vision of being an established real estate
development and investment entity in Saudi Arabia, offering their shareholders
solid, Shari'ah compliant, long-term returns from a market with substantial
potential.
FINANCIAL OVERVIEW
During the six month period ended 30 June 2013, the Company has posted a net
profit of $19.00 million compared to $2.24 million in the comparative period.
The increase is primarily from the share of profit from associate (MMCI). The
current period share of profit represents the share of profit for six months as
compared to approximately a month's profit in June 2012 as the acquisition of
34.121% in MMCI was completed on 26 May 2012.
The MMH investment in MMCI has increased by $59.25 million since the
acquisition of 34.121% interest in MMCI in May 2012. The profits of MMCI were
mainly derived from a property lease and fair value changes in investment
properties and available for sale investments. These positive results confirm
the strategic investment plan, executed by the Company, is delivering
considerable value.
The employee costs have almost doubled compared to the prior period due to an
increase in the number of employees including a Chief Financial Officer (CFO).
The other operating expenses marginally decreased by 3% to $298k (2012: $307k).
Other operating expenses mainly comprised of $127k (2012: $192k) for legal &
professional fees, $53k (2012: $0.5k) for office rent and other expenses, $44k
(2012: $50k) for business travel expenses and $46k (2012: $32k) for business
development expenses.
Earnings per share
The earnings per share has increased almost seven fold compared to the
comparative period as summarised below, mainly derived from the share of profit
from MMCI.
30 June 30 June
2013 2012
USD USD
Basic Earnings per share 0.013 0.002
Diluted Earnings per share 0.013 0.002
Revenue
Revenue was principally derived from real estate advisory and consultancy
services to MMCI.
30 June 30 June
2013 2012
USD USD
Real estate advisory and consultancy 1,089,918 919,619
services
Change in fair value of investment property
The exchange transaction of the Eye of Ajman land plots for a 34.12% equity
interest in MMCI resulted in a net gain on exchange of assets of $1.99 million
for the Group over the comparative period ended 30 June 2012.
Share of profit from associates
This represents the share of profit from associate (MMCI) for the period of 6
months to 30 June 2013 and is comprised of the following sources:
Six month Six month
period ended period ended
30 June 2013 30 June 2012
USD USD
in million in million
Share of profit from associate
- Lease rental income 3.15 0.43
- Negative goodwill on Jabal Al Noor acquisition in 7.07 -
the period
- Profit on disposal of investments and properties - -
- Fair value change investment and real estate 6.31 -
properties
- Share of profit from associates 0.10 -
- Other operating income/expense (0.29) 0.2
16.34 0.45
Share of other comprehensive income from associate
- Fair value change available for sale investment 2.55 -
18.89 0.45
The share of profit from associate of $18.89 million represents MMH share of
profit in MMCI net income for the period of 6 months to 30 June 2013. In the
comparative period, MMH share of profit in MMCI net income of only one month as
the interest in MMCI was acquired at the end of May 2012.
Investments
Following the exchange of the Eye of Ajman land plots for a 34.12% equity
interest in MMCI, the investment in MMCI is the only investment of the Company
at 30 June 2013. MMCI is a company with subsidiaries owning land plots and an
income generating development in the provinces of Makkah, Madinah, Jeddah and
elsewhere in the Kingdom of Saudi Arabia (KSA). The Directors therefore believe
that this acquisition, in the context of the strong demand for real estate
developments in the regions of Makkah and Madinah, which is fuelled by the
population growth and increasing number of visitors to the region associated
with the Islamic tourism sector, provides a more attractive investment
opportunity prospective for the Company to focus its commercial activities.
At the time of acquisition of MMCI's 34.12% interest in May 2012, the fair
value of 34.12% interest was $400 million. At 30 June 2013, the carrying value
of the investment was $459.25 million. This is an increase of $59.25 million
(15%) in over one year. This is indicative of the sound investment by MMH in
the KSA real estate market.
Liquidity position
The Company does not have any borrowings at the reporting date.
Cashflows
Six month period Six month period
ended ended
30 June 30 June
2013 2012
USD USD
Net cashflow from operations (120,615) (635,526)
Net cashflow from investing (1,009) (1,306)
Net cashflow from financing - 1,267,029
Net (decrease)/increase in cash (121,624) 630,197
Cash and cash equivalents at start of 460,934 417,783
period
Cash and cash equivalents at the end of the 339,310 1,047,980
period
Operating cash flows
The net cash outflow from operating activities during the period was $121k,
with working capital mainly used in relation to fees payable for evaluating
options for raising the profile of the Company and improving liquidity in the
shares, including seeking admission of the shares to trading on another stock
exchange in addition to, or other than, ISDX.
Financing cash flows
There was no cash flow from financing activities during the period. In the
comparative period ended 30 June 2012, the Company received the financial
contribution from a related party in support of expenses incurred in connection
with the work undertaken on the MMCI acquisition and for evaluating options for
raising the profile of the Company, including seeking admission of the shares
to trading on another stock exchange in addition to, or other than, ISDX.
MAKKAH & MADINAH HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2013
Notes Six months Year ended Six months
ended 30 31 December ended 30
June 2013 June 2012
2012
(unaudited) (unaudited)
(audited)
USD (Restated) (restated)
USD USD
Revenue 1,089,918 1,948,229 919,619
Change in fair value of investment - 1,994,942 1,994,942
property
Employee costs (467,510) (682,137) (252,164)
Share based payment expense 683,675 (683,675)
Other operating expenses (295,596) (853,868) (307,544)
Legal and professional fees (898,681) (2,102,388) (562,828)
Depreciation (3,754) (1,951) -
Impairment of available for sale - (123,257) (123,257)
assets
Operating (loss)/profit 108,052 (504,105) 1,668,768
Share of profit from associate 16,342,917 29,867,629 453,465
Finance expense - (18,044) (1,430)
Profit for the period 16,450,969 29,345,480 2,120,803
Other Comprehensive income
Recycle of prior period available - 123,257 123,257
for sale assets losses
Share of fair value change of 2,552,131 10,487,840 -
associate's available for sale
investment
Total comprehensive income for the 19,003,100 39,956,577 2,244,060
period
Earnings per share attributable to
the equity holders of the parent
during the period
Basic earnings per share for the 2 0.013 0.023 0.002
period
Diluted earnings per share for the 2 0.013 0.023 0.002
period
MAKKAH & MADINAH HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
30 June 31 December 30 June
2013 2012 2012
(unaudited) (audited) (unaudited)
(Restated)
USD USD USD
ASSETS
Non-current assets
Investment in associates 459,250,517 440,355,469 400,453,465
Property, plant and equipment 27,853 30,597 1,306
459,278,370 440,386,066 400,454,771
Current assets
Trade receivables 261,053 631,471 475,837
Prepayments, advances & other 771,080 797,336 158,575
receivables
Cash and cash equivalents 339,310 460,934 1,047,980
1,371,443 1,889,741 1,682,392
Total assets 460,649,813 442,275,807 402,137,163
EQUITY
Share capital 10,220,614 10,220,614 10,210,843
Share premium 395,001,706 395,001,706 394,835,588
Reverse acquisition reserve 1,636,894 1,636,894 1,636,894
Available for sale financial 13,039,971 10,487,840 -
assets reserve
Retained earnings / (losses) 38,825,240 23,057,946 (5,286,358)
458,724,425 440,405,000 401,396,967
LIABILITIES
Current liabilities
Trade and other payables 1,925,388 1,870,807 740,196
Total liabilities 1,925,388 1,870,807 740,196
Total equity and liabilities 460,649,813 442,275,807 402,137,163
MAKKAH & MADINAH HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2013
Share Share Reverse Available Retained Total
Premium acquisition for sale
Capital reserve financial earnings /
assets (losses)
reserve
USD USD USD USD USD USD
(Restated) (Restated)
At 1 January 2012 10,210,843 394,835,588 2,591,217 (123,257) (9,628,513) 397,885,878
Transactions with
owners
Capital contribution - - - - 1,267,029 1,267,029
Transfer of reserves - - (954,323) - 954,323 -
10,210,843 394,835,588 1,636,894 (123,257) (7,407,161) 399,152,907
Other comprehensive - - - 123,257 - 123,257
income - recycle of
available for sale
financial asset
losses
Comprehensive income - - - - 2,120,803 2,120,803
for the period
At 30 June 2012 10,210,843 394,835,588 1,636,894 - (5,286,358) 401,396,967
At 1 July 2012 10,210,843 394,835,588 1,636,894 - (5,286,358) 401,396,967
Transactions with
owners
Exercise of warrants 9,771 166,118 - - - 175,889
Capital contribution - - - - 435,952 435,952
10,220,614 395,001,706 1,636,894 - (4,850,406) 402,008,808
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
Comprehensive income - - - - 27,224,677 27,224,677
for the period
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
Share of fair value - - - 2,552,131 - 2,552,131
change of associate's
available for sale
investment
Share based payment - - - - (683,675) (683,675)
expense
Comprehensive income - - - - 16,450,969 16,450,969
for the period
At 30 June 2013 10,220,614 395,001,706 1,636,894 13,039,971 38,825,240 458,724,425
MAKKAH & MADINAH HOLDINGS LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2013
Six months Year ended Six months
ended 30 ended 30
June 2013 30 December June 2012
(unaudited) 2012 (unaudited)
(Audited)
USD (Restated) (Restated)
USD USD
Profit for the period 16,450,969 29,345,480 2,120,803
Adjustments for non-cash
items:
Share of profit from (16,342,917) (29,867,629) (453,465)
associate
Change in fair value of - (1,994,942) (1,994,942)
investment property
Impairment of - 123,257 123,257
available-for-sale financial
assets
Depreciation 3,754 1,951 -
Professional fees settled by - 175,889 -
issues of ordinary shares
Share based payment expense (683,675) 683,675 -
Working capital changes:
Trade and other receivables 396,673 (1,300,363) (633,421)
Trade and other payables 54,581 1,205,400 202,242
Cash (used in) / generated (120,615) (1,627,282) (635,526)
from operations
Cash flows from Investing
activities
Purchase of property, plant (1,009) (32,548) (1,306)
and equipment
Net cash used in investing (1,009) (32,548) (1,306)
activities
Cash flows from financing
activities
Capital contribution - 1,702,981 1,267,029
Cash generated from financing - 1,702,981 1,267,029
activities
Net (decrease)/increase in (121,624) 43,151 630,197
cash and cash equivalents
Cash and cash equivalents at 460,934 417,783 417,783
beginning of the period
Cash and cash equivalents at 339,310 460,934 1,047,980
end of the period
MAKKAH & MADINAH HOLDINGS LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
Summary of significant accounting policies
1. Basis of preparation
The consolidated interim financial information of the Company for the period
ended 30 June 2013 comprise the results of the Company and its subsidiaries
(together, the "Group") and have been prepared in accordance with the rules of
the ISDX growth market.
The consolidated interim financial information does not include all of the
information and disclosures required for full annual financial statements.
They should be read in conjunction with the Annual Report and Audited
Consolidated Financial Statements for the year ended 31 December 2012, which
were prepared in accordance with International Financial Reporting Standards
(IFRS) adopted for use in the European Union issued by the International
Accounting Standards Board (IASB). The annual financial statements are
available to download from www.mm-holdings.com.
The accounting policies applied by the Group in preparing the consolidated
interim financial information for the period ended 30 June 2013 are consistent
with those applied by the Group in its audited consolidated financial
statements for the period ended 31 December 2012 and is consistent with those
that will be applied by the Group in its consolidated financial statements for
the year ended 31 December 2013.
The consolidated interim financial information for the period ended 30 June
2013 and the comparatives for 30 June 2012 are unaudited. The comparatives for
31 December 2012 are audited and received an unqualified opinion.
The preparation of financial information in conformity with IFRS as adopted by
the European Union requires the use of certain critical accounting estimates.
It also requires management to exercise its judgement in the process of
applying the group's accounting policies.
In preparing this interim financial information, the key judgement and
estimates made by the Board are the same as those applied in the financial
statements as of, and for the period ended 31 December 2012.
There have been no material changes to reportable contingent liabilities since
31 December 2012.
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.
30 June 31 December 30 June
2013 2012 2012
Profit attributable to equity holders 16,450,969 29,345,480 2,120,803
of the parent (USD)
Weighted average number of ordinary 1,267,249,125 1,266,541,010 1,266,006,519
shares in 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.
30 June 31 December 30 June
2013 2012 2012
Profit attributable to equity holders 16,450,969 29,345,480 2,120,803
of the parent (USD)
Weighted average number of ordinary 1,267,249,125 1,266,541,010 1,266,006,519
shares in issue
Adjustments for:
Assumed conversion of share warrants 12,853,983 1,390,618 15,567,870
Assumed conversion of share options 1,335,435 14,022,527 1,551,849
Weighted average number of ordinary 1,281,438,543 1,281,954,155 1,283,126,238
shares for diluted earnings per share
3. Subsequent events
Increase in share capital
In July 2013, pursuant to a settlement agreement between the Company and
McClure Naismith, the Company has issued 800,000 ordinary shares to McClure
Naismith at the price of GBP 0.125 pence per share. Following the issue of
shares to McClure Naismith, the total share capital of the Company has
increased to 1,268,049,125 ordinary shares.
4. Restatement of Comparatives
i. Related party receivable and payable balances in the 2012 interim reporting
period were disclosed as a net balance from 2 different related parties
incorrectly hence the comparatives have been amended to reflect the correct
position as confirmed to management in 2012. This restatement resulted in a
gross up of US$ 141,128 between trade and other payables and other
receivables.
ii. 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 has been duly corrected.
The Directors of Makkah & Madinah Holdings Limited have issued this
announcement after due and careful enquiry; and accept responsibility for its
content.
Enquiries:
Makkah & Madinah Holdings Limited:
Victoria Arscott, Investor Relations Manager;
+971 4 4239033;
[email protected]
Daniel Stewart and Company Plc:
Paul Shackleton;
+44 20 7776 6550;
[email protected]