Orascom Development Holding AG: records a net profit of CHF 17.5 million, an increase of 464.5%...

Orascom Development Holding AG / Key word(s): Interim Report/Interim Report

18-May-2022 / 07:00 CET/CEST
Release of an ad hoc announcement pursuant to Art. 53 LR
The issuer is solely responsible for the content of this announcement.

Ad hoc announcement pursuant to Art. 53 LR.

Orascom Development Holding ("ODH") (SIX ODHN.SW) has released its consolidated financial results for Q1 2022.

Orascom Development Holding records a net profit of CHF 17.5 million, an increase of 464.5% compared to same period last year.

Key Highlights of Q1 2022

- Total revenues up 33.2% to CHF 141.9 million compared to same period last year

- Adjusted EBITDA recorded a 27.6% increase to CHF 37.5 million compared to same period last year

- Our share of associates reported a profit of CHF 11.6 million vs. a loss of CHF 4.3 million in Q1 2021

- Net profit increased by 464.5% to CHF 17.5 million compared to CHF 3.1 million in Q1 2021

- Cash flow from operations reached CHF 6.1 million in Q1 2022

- Net real estate sales reached CHF 133.0 million in Q1 2022

- Real estate deferred revenue balance grew by 12.4% to CHF 712.2 million

- Real estate cash collection up 12.3% to CHF 88.5 million

Altdorf, 18 May 2022 - Orascom Development Holding (ODH) started the year on solid grounds with strong operational and financial results, despite the headwinds from the Russian/Ukrainian conflict and the economic backdrop in Egypt especially after the devaluation of the Egyptian Pound against the US Dollar. The strong growth during the first quarter of the year was driven by significant increase in the real estate segment's performance and enhanced business performance of the hotels and town management segments.

Financial Review

A Strong First Quarter
Revenues reached CHF 141.9 million, up 33.2% compared to CHF 106.5 million in Q1 2021. Gross profit increased by 22.8% to CHF 43.7 million in Q1 2022 (Q1 2021: CHF 35.6 million) with a gross margin of 30.8% in Q1 2022. The boost in revenues and gross profit resulted from the acceleration of our construction activities, with real estate revenues reaching CHF 94.1 million, an increase of 12.8% y-o-y compared to Q1 2021, in addition to the enhanced business performance of the hotels and town management segments. Adj. EBITDA increased by 27.6% to CHF 37.5 million (Q1 2021: CHF 29.4 million), and EBITDA also increased by 55.0% to CHF 40.0 million (Q1 2021: CHF 25.8 million). Other gains and losses reported a loss of CHF 9.1 million in Q1 2022 vs. a gain of CHF 0.7 million in Q1 2021. The one-off FX translation loss is mainly related to the devaluation of the Egyptian Pound against foreign currencies that took place in March 2022. Our share of associates reported a profit of CHF 11.6 million vs. a loss of CHF 4.3 million in Q1 2021. The enhanced performance in the associates was mainly driven by the better performance of our share in Andermatt Swiss Alps, whereby the company reported a profit of CHF 10.3 million in Q1 2022 vs. a loss of CHF 4.5 million in Q1 2021. Finance cost increased by 11.0% to CHF 9.1 million in Q1 2022 (Q1 2021: CHF 8.2 million) due to the increase in interest rates in Egypt.

This operational excellence was reflected in our bottom-line figures whereby net income increased by 464.5% to reach CHF 17.5 million in Q1 2022 with a net profit margin of 12.3% vs. CHF 3.1 million in Q1 2021 and a margin of 2.9%. It is important to note that bottom line results had a negative FX impact of CHF 8.7 million in Q1 2022 vs. a negative impact of 1.7 million in Q1 2021. Adjusted net income excluding one-offs (which includes forex losses or gains along with any non-operational one-off transactions) increased by almost 1,008.3% from CHF 2.4 million in Q1 2021 to CHF 26.6 million in Q1 2022. The company was able to generate CHF 6.1 million in cash from operations during Q1 2022. Total cash and cash equivalent balance reached CHF 196.1 million, while total debt reached CHF 442.8 million and net debt reached CHF 246.7 million.

Group Real Estate: Net real estate sales of CHF 133.0 million in Q1 2022, coupled with accelerated construction, boosting our segment's revenues to CHF 94.1 million
New real estate sales for Q1 2022 reached CHF 133.0 million (Q1 2021: CHF 145.8 million). O West was the group's largest contributor to new sales during the reported period (44%), followed by El Gouna (37%), Oman (7%), Makadi Heights (6%) and finally Lustica Bay (5%). We managed to increase our average selling prices in Q1 2022 in El Gouna by 25.1%, in O West by 19.6%, in Makadi Heights by 15.9% and in Luštica Bay by 7.0% vs. the average selling prices reported in Q1 2021. Real estate revenues increased by 12.8% to CHF 94.1 million in Q1 2022 (Q1 2021: CHF 83.4 million). Adjusted EBITDA remained stable at CHF 37.5 million in Q1 2022. The increase in real estate revenues was driven by the accelerated construction pace across all our projects especially in Egypt. Total deferred revenue from real estate that is yet to be recognized until 2026 increased by 12.4% to CHF 712.2 million in Q1 2022 (Q1 2021: CHF 633.8 million). Real estate cash collection increased by 12.3% to CHF 88.5 million in Q1 2022 compared to CHF 78.8 million in Q1 2021.

Group Hotels: Ongoing recovery across all destinations, with significant increase in revenues and GOP across all our hotels
A good start for our hotel's segment recording more than double digit growth for all the main operational KPIs compared to the same period last year, despite the headwinds of Omicron variant during the first 2 months of Q1 2022 and then the Russian and Ukrainian conflict affecting the hospitality industry. As tourism emerged from the Covid-19 pandemic, the emergence of Omicron and the Russian-Ukrainian crisis hampered progress in Q1 2022. Thanks to the EU's proactive development of endemic strategies that allowed loosening of travel restrictions for intra-European and international travel, we experienced strong demand in March to end the quarter on a high note. Revenues increased by 181.1% to CHF 29.8 million in Q1 2022 pushing our GOP to CHF 9.5 million, compared to a GOP loss of CHF 0.5 million in Q1 2021 on the back of further improvements in operational efficiencies. The segment reported an Adj. EBITDA of CHF 5.2 million in Q1 2022 compared to a negative CHF 2.4 million in Q1 2021. Since the beginning of 2022, we initiated major refurbishment projects in various properties across El Gouna and The Cove. With part of the portfolio upgraded and a revised marketing approach for each property, we are confident that we will be able to increase our overall selling rates over the next years.

Group Destination Management Continued growth, reaping the benefits of the successful restructuring implementation

The destination management segment continued to sustain its enhanced operational performance and started the year with a solid set of results, securing recurring revenue stream to the group. Revenues in Q1 2022 increased by 44.0% to CHF 18.0 million (Q1 2021: CHF 12.5 million) while Adj. EBITDA also increased by 383.3% to CHF 2.9 million in Q1 2022 (Q1 2021: CHF 0.6 million). The notable increase in revenues and Adj. EBITDA was a consequence of a rich calendar of events across destinations and signals our operational excellence as a result of the successful restructuring implementation which we started putting in motion early 2021, thereby improving the quality and profitability of our services and amenities.

Details on Destinations

El Gouna, Red Sea:
Net real estate sales reached CHF 49.7 million in Q1 2022 (Q1 2021: CHF 59.0 million). We continued to increase our average selling prices by 25.1% to CHF 4,461 per sqm (Q1 2021: CHF 3,567 per sqm). In the reported quarter, we added new inventory of USD 25.9 million in "Cyan" and "Shedwan". In Q2 2022, we are planning to launch a new real estate project "The Nines" with total inventory value of USD 60 million. We are planning to deliver 285 units this year, with main deliveries happening in Ancient Sands and Cyan, committing to meeting our contractual delivery obligations of which already 58 units were delivered during Q1 2022. Real estate revenues continued its uptrend with an 8.1% increase to CHF 44.1 million in Q1 2022 (Q1 2021: CHF 40.8 million).

El Gouna hotels continued to maintain its successful performance since Q4 2021 and benefited from its leading market positioning and strong ties with leading European tour operators afforded a growth in the Hotels' bottom-line operational and financial results. Revenues increased by 171.4% to CHF 15.2 million in Q1 2022 (Q1 2021: CHF 5.6 million). The continuous implementation of cost saving, and cash preservation measures resulted in an overall positive GOP of CHF 6.6 million up 11x compared to same period last year (Q1 2021: CHF 0.6 million). GOP PAR also grew from CHF 3 in Q1 2021 to CHF 28 in Q1 2022. Our hotels continued to benefit from the pent-up demand of our traditional German-source markets in addition to the local market. Occupancy rate for the Q1 2022 increased to 61% (Q1 2021: 26%) at an Average Room Rate (ARR) of CHF 75 in Q1 2022 (Q1 2021: CHF 66). Foreigners represented c. 54% of our total occupancy in Q1 2022. Moving to the hotel's development side, we are progressing with the full renovation of turning Bellevue hotel into The Chedi hotel (86 rooms). The hotel is set to be operational during the second half of 2022. Destination management continued its positive momentum with revenues up 49.0% to CHF 15.5 million (Q1 2021: CHF 10.4 million). Total revenues for El Gouna were up 31.7% to CHF 74.8 million in Q1 2022 (Q1 2021: CHF 56.8 million).

O West, Egypt:
O West continues to affirm its leading position in West Cairo and recorded CHF 58.6 million in sales for Q1 2022, a growth of 29.1% compared to CHF 45.4 million in Q1 2021. This brings cumulative sales in O West to CHF 742.4 million from its launch date. We managed to increase our average selling prices during Q1 2022 by 19.6% to CHF 2,004/sqm vs. CHF 1,676/sqm in Q1 2021 and by 13.4% compared to FY 2021. We are speeding up our construction pace and completed the construction of 444 villas and progressing with the construction of 864 apartments. Additionally, the foundation stone has been laid for O West Club with plans to start construction during Q2 2022. The club will be partially open by Q3 2023. To date, we have 2,476 members in the club, which will provide a steady recurring income stream to the group. Total revenues of O West increased by 48.6% to CHF 30.9 million (Q1 2021: CHF 20.8 million).

Luštica Bay, Montenegro:
Luštica Bay has started the year on a positive momentum operational and financially. Net sales were up 25.5% to CHF 6.4 million in Q1 2022 (Q1 2021: CHF 5.1 million). We managed to increase our average selling prices by 7.0% to CHF 4,647 in Q1 2022. We handed over 15 units in the "Marina Village" during April 2022 with plans to hand over 88 units in the "Centrale" area during 2022. Additionally, we started the construction of 196 units in the "Centrale" and the "Marina Village" areas. Real estate revenues increased by 73.3% to CHF 5.2 million (Q1 2021: CHF 3.0 million). Additional activities to increase the overall attractiveness of the destination supported hotel occupancies and F&B revenues. The Chedi Luštica Bay witnessed a 150% increase in revenues over 2022 driven by a joint winter charter operation with FTI. Occupancy rate for the Q1 2022 increased to 28% (Q1 2021: 9%). Total revenues for Luštica Bay increased by 69.4% y-o-y to CHF 6.1 million in Q1 2022.

Hawana Salalah, Oman:
Hawana Salalah experienced a positive change of events during Q1 2022, with Covid-19 restrictions finally being lifted, and hotels were allowed to operate at 100% capacity. Net real estate sales were up 86.2% to CHF 5.4 million in Q1 2022 (Q1 2021: CHF 2.9 million). Construction progress and real estate deliveries in Hawana Salalah are continuing at a steady speed across multiple projects. Real estate revenues reached CHF 3.9 million in Q1 2022. During Q1 2022, our hotels achieved a notable growth in revenues, up from CHF 0.4 million in Q1 2021 to CHF 7.1 million in Q1 2022. The hotels reported a positive GOP of CHF 1.8 million up from a loss of CHF 1.3 million in Q1 2021. Occupancy rates increased to 54% in Q1 2022 vs. 5% in Q1 2021. To date, two hotels are opened (Rotana Hotel and Al Fanar Hotel). Total revenues from Hawana Salalah destination increased by 93.4% to CHF 11.8 million in Q1 2022 (Q1 2021: CHF 6.1 million).

Jebel Sifah, Oman:
Net real estate sales reached CHF 4.4 million in Q1 2022. Construction progress and real estate deliveries in Jebel Sifah are continuing at a steady speed across multiple projects. Real estate revenues reached CHF 4.5 million (Q1 2021: CHF 7.1 million). We've expanded marina berth capacity from 83 berths to 117 berths by adding floating pontoons capitalizing on demand from boat owners to move their boats to Sifah. We launched our serviced beach which has already brought a lot of attraction to the destination. Total revenues for Jebal Sifah decreased by 26.8% to CHF 6.0 million in Q1 2022 (Q1 2021: CHF 8.2 million).

Makadi Heights, Egypt:
Net real estate sales reached CHF 8.5 million (Q1 2021: CHF 18.4 million). Construction works of Phase 2 of the project is progressing with plans to deliver almost 248 units during July 2022. Average selling prices have considerably grown at 15.9% to CHF 1,922/sqm. Real Estate revenues reached CHF 5.6 million in Q1 2022 (Q1 2021: CHF 6.3 million). With the speeding up of construction progress, revenues are expected to kick in more over the coming quarters. Total revenues from Makadi Heights destination reached CHF 5.9 million in Q1 2022 (Q1 2021: CHF 6.6 million).

The Cove, UAE:
The Cove continues to be the best performing destination. The Hotel's occupancy rates increased to 67% in Q1 2022 (Q1 2021: 43%). On the operational level, in Q1 2022, TRevPAR increased by 62.7% to CHF 145, while GOP also increased by 90.0% to CHF 1.9 million compared to same period last year. We are also planning to start some renovation works in some of the existing rooms (204 units) to be completed by Q3 2022. Total revenues for The Cove increased by 58.3% to CHF 5.7 million.

Business Updates 2022:
Fiscal year 2022 started with challenging notes on both global and local fronts as global economic uncertainty intensified with the Russian and Ukrainian conflict. The global economic ramifications of the war has pushed the Central Bank of Egypt (CBE) to raise interest rates by 100 basis points. We also witnessed a 14% devaluation in the Egyptian pound against the US Dollar.

While the situation still remains highly fluid, and the outlook is subject to extraordinary uncertainty. Energy and commodity prices have surged, adding to inflationary pressures from supply chain disruptions and the rebound from the Covid 19 pandemic. ODH is closely monitoring the market developments. Despite the current uncertainties, there is neither an indication of a significant disruption of the Group's business nor signs of a material impact on its future operational performance. Nevertheless, we are continuing to abstain at the time being from providing guidance for 2022.

It is worth noting that Egyptians still represent more than 46% of our hotel's occupancy and we depend highly on the Western European markets, mainly Germany, Belgium, France, Netherland, UK, and Switzerland, as our main feeder source markets for foreign tourism.

Management remains confident in the company's ability to uphold its leading market performance as one of the leading real estate and hospitality companies, supported by its flexible balance sheet structure and prudent risk management, which would solidify ODH's position against any unforeseen market challenges.

Our key areas of focus for the year include:

1) Hospitality Segment: Demand from our traditional German-source markets that feed into El Gouna is expected to increase. Moreover, we will continue campaigning staunchly in the local market to balance the international demand patterns by offering new products directed to multiple domestic segments. We are planning the renovation across some of our hotels in FY 2022 to attract higher ARR clients. Additionally, we will continue to keep a close eye on protecting our hotels' cash balance and monitoring our costs.

2) Real Estate Segment: We will continue fast-tracking our real estate construction to meet contractual dates or deliver before time, thus increasing the segment's revenues and mitigating any potential inflationary effect on cost. We will continue increasing the average selling prices across all destinations to absorb any expected escalation in raw materials prices, while closely examining construction and infrastructure costs to guarantee high-value engineering and procurement savings. We will also work on maximizing cross-selling synergies between our destinations.

3) Town Management Segment: Is a reliable source of cash-flow, and an essential aspect to finance the group's growth and shield our operations from the cyclical slowdowns caused by any unpredictable events. Further expanding the number of residents, demonstrating our successes in disciplined deliveries and correct targeting across all destinations. We will also provide attractive offerings for startups and entrepreneurs, encouraging them to come settle in our destinations. We will remain focused on extra works (home renovation) strengthening our home offerings by introducing standard home renovation packages tailored for the owner's needs with better payment terms.

About Orascom Development Holding AG:
ODH is a leading developer of fully integrated destinations that include hotels, private villas and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. ODH's diversified portfolio of destinations is spread over 7 jurisdictions (Egypt, UAE, Oman, Switzerland, Morocco, Montenegro, and United Kingdom), with primary focus on touristic destinations. ODH currently operates nine destinations: four in Egypt (El Gouna, Taba Heights, Makadi Heights and Byoum), The Cove in the United Arab Emirates, Jebel Sifah and Hawana Salalah in Oman, Luštica Bay in Montenegro, and Andermatt in Switzerland. The shares of ODH are listed on SIX Swiss Exchange. ODH recently launched O West, the latest addition to its portfolio and its first project in Cairo, Egypt, located in the Sixth of October City.

Contact for Investors:
Sara El Gawahergy
Head of Investor Relations
Head of Strategic Projects Management
Tel: +20 224 61 89 61
Tel: +41 418 74 17 11
Email: [email protected]

Contact for Media Relations:
Philippe Blangey
Partner
Dynamics Group AG
Tel: +41 432 68 32 35
Email: [email protected]csgroup.ch

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PERFORMANCE OR ACHIEVEMENTS, AND MAY CONTAIN WORDS SUCH AS "UNDERSTANDS", "ANTICIPATES", "EXPECTS", "ESTIMATES" "IT IS LIKELY" OR OTHER TERMS OR EXPRESSIONS WITH SIMILAR MEANING. THESE STATEMENTS ARE SUBJECT TO A NUMBER OF RISKS, UNCERTAINTIES AND ASSUMPTIONS. THE COMPANY CAUTIONS READERS THAT CERTAIN RELEVANT FACTORS MIGHT BE THE CAUSE FOR ACTUAL RESULTS TO DIFFER FROM THE PLANS, GOALS, EXPECTATIONS, ESTIMATES AND INTENTIONS EXPRESSED IN THIS DOCUMENT. NEITHER THE COMPANY NOR ANY RELATED COMPANIES, DIRECTORS, OFFICERS, REPRESENTATIVES OR EMPLOYEES THEREOF SHALL IN ANY EVENT BE LIABLE AS TO THIRD PARTIES (INCLUDING INVESTORS) FOR ANY INVESTMENTS OR BUSINESS DECISIONS ADAPTED OR ACTS PERFORMED BY THEM ON THE BASIS OF THE INFORMATION ANY STATEMENTS CONTAINED HEREIN OR FOR ANY CONSEQUENTIAL, SPECIAL OR SIMILAR DAMAGES DERIVED THEREFROM. ANY MARKET INFORMATION AND COMPANY'S COMPETITIVE POSITION DATA INCLUDING MARKET PROJECTIONS USED IN THIS DOCUMENT HAVE BEEN DERIVED FROM IN COMPANY'S STUDIES, MARKET RESEARCH REPORTS, PUBLICLY AVAILABLE DATA AND INDUSTRY PUBLICATIONS. ALTHOUGH THE COMPANY HAS NO REASON TO BELIEVE THAT THIS INFORMATION OR THESE REPORTS ARE INACCURATE IN ANY MATERIAL, RESPECT, THE COMPANY HEREBY STATUS THAT IT HAS NOT INDEPENDENTLY CHECKED ANY COMPETITIVE POSITION, MARKET SHARE, MARKET VOLUME, MARKET GROWTH OR OTHERS.