(2019-03-31) Orascom Development revenues grow by 28.9% to EGP 3.3 bn Orascom Development Egypt (ORHD) ends the year on solid grounds with strong operational and financial results across all business segments. Revenues grew by 28.9% to EGP 3.3 billion vs. EGP 2.6 billion in FY 2017. The increase in revenues came as a result of enhanced operational performance across all business segments in all our destinations. Gross profit grew 33.7% to EGP 1.3 billion during the period, reflecting a gross profit margin of 39.4%. Adj. EBITDA also witnessed remarkable growth of 33.8% y-o-y to EGP 1.36 billion, translating into an Adj. EBITDA margin of 40.6%. The operational excellence along with the one-off gain resulting from the sale of the non-core assets boosted our profitability, growing the net income by 27.6% to EGP 500.2 million in FY 2018 vs. EGP 392.0 million in FY 2017.
Corporate Highlights: We concluded the sale of Royal Azur and Club Azur Hotels as well as a land plot in Makadi at a higher EV of c. EGP 856 million. The sale resulted in cash proceeds of EGP 408 million and deconsolidation of EGP 260.1 million of debt.
Group Hotels: Hotels continued to record impressive y-o-y growth in 2018, capitalizing on the growing tourism demand to Egypt in general and the Red Sea in specific. The disciplined execution of our strategy to improve products and services coupled with focused yielding to maximize revenue opportunities impacted our hotels positively. Revenues increased by 31.5% to EGP 1.4 billion, accompanied by a 43.9% increase in GOP to EGP 593.9 million in FY 2018 vs. EGP 412.8 million in FY 2017. The segment’s Adj. EBITDA continued its uptrend and increased by 33.6% to EGP 579.9 million vs. EGP 434.0 million in FY 2017.
Group Real Estate: Net real estate sales for 2018 recorded EGP 2.3 billion, a growth of 56.5% over last year, the highest in ODE’s history and exceeding our target for the year. Growth in sales was driven by the increase in pricing and unit sales in El Gouna and Makadi Heights, a total of 490 units were contracted representing a growth of 74.4% in 2018. Revenues increased by 32.3% to EGP 1.0 billion in FY 2018 vs. EGP 773.5 million in FY 2017 on the back of increased deliveries. Total deferred revenue plus deferred interest income from real estate that is yet to be recognized till 2021 reached EGP 3.0 billion and total real estate receivables portfolio increased by 28.1% to EGP 4.1 billion, both figures exclude O West sales.
Group Town Management: Town management segment continued to grow because of the successful restructuring reforms that was implemented throughout the year. We focused on streamlining operations, eliminating waste, improving profitability and quality of service in addition to increasing the all year-round activities and events. Revenues increased by 31.4% to EGP 576 million in FY 2018 and Adj. EBTIDA increased by 31.8% to EGP 89.5 million.
El Gouna, Red Sea: The growing demand on the Red Sea, supported by a fully-fledged marketing campaign in the German speaking markets, resulted in a boost in room rates. While occupancy increased from 77% in FY 2017 to reach an impressive 82% in FY 2018, TREVPAR also increased by 34% from EGP 958 in 2017 to EGP 1,284. Continuous improvement of operational processes and cost structures resulted in an increase in GOP PAR by 43% from EGP 455 in 2017 to EGP 649. Hotels revenues increased by 31% to EGP 1.2 billion vs. EGP 890.8 million in FY 2017 and GOP surged by 39.9% to reach EGP 586 million in FY 2018 vs. EGP 419 million in FY 2017. We finished the renovation of two hotels in 2018 and working on the remaining three to be finalized in 1H 2019.
Net real estate sales exceeded our target for the year and recorded a 41.1% increase to EGP 2.0 billion vs. EGP 1.4 billion in FY 2017. Throughout 2018 we launched 2 new projects “Ancient Sands Villas” and “Cyan” along with the last phase of “Tawila” all for a total inventory of EGP 2.0 billion and were sold out. Real estate revenues increased by 32.9% to EGP 1.0 billion vs. EGP 760.4 million in FY 2017.
Town management revenues continued its positive performance increasing by 31.4% to EGP 522.4 million vs. EGP 397.6 million in FY 2017. The increase is mainly due to the increase in activities throughout 2018 and the improving the quality and the profitability of our amenities.
Makadi Heights, Red Sea Makadi Heights, our new rising destination, net sales increased to EGP 249.5 million vs. only EGP 1.0 million in FY 2017. Real Estate revenues increased by 89.7% to EGP 5.5 million in FY 2018. Town management revenues started to pick up and increased by 122.4% to reach EGP 18.9 million in FY 2018.
O West, Cairo We successfully held the soft launch of O West in December and sold EGP 2.2 billion in only two weeks. Contracted figures will be included in Q1 2019 results. The launched units included single-family homes, standalone villas, twin and town houses with an average selling price of EGP 22,300 per m2 for core and shell.
The official launch started in March 2019 and included a wide range of apartments, duplexes, penthouses and lofts. The first launched phase included 340 units with a total inventory of EGP 1.2 billion and an average selling price of EGP 18,200 per m2 , fully finished. Sales is progressing very well, showing very strong demand and appetite from our clients which strongly reaffirms ODE’s position as the market leader in building fully integrated towns, benefiting from its solid brand equity and unique community management experience.
Taba Heights, Sinai We are still working to minimize the effect of the current travel bans imposed on the area through maintaining close control on expenses, as well as developing strategic partnerships with several prominent East European tour operators. Whereas the impact of the new partnerships is only due to reflect strongly on the 2019; still, in 2018 hotels revenues increased by 75.3% to EGP 126.2 million in FY 2018 vs. EGP 72.0 million in FY 2017. Occupancy rates increased by 22.2% to reach 33% in FY 2018 vs. 27% in FY 2017.
Outlook 2019
ODE is targeting topline revenues of EGP 4.0 billion and an Adjusted EBITDA within the range of EGP 1.40 billion – EGP 1.45 billion. These estimates exclude the contribution of Royal Azur and Club Azur hotels and Tamweel Group that the Group has identified as non-core assets and disposed in 2018. Thus, when FY 2018 figures are normalized for those assets, the targeted 2019 revenues represents a 33% growth from EGP 3.0 billion in FY 2018 and the Adj. EBITDA represents an 22-27% growth from EGP 1.1 billion in FY 2018.
The Group is also eyeing new real estate net sales of EGP 6.5 billion - EGP 7.0 billion compared to EGP 2.3 billion in 2018, capitalizing on its first home project “O West” and building on the positive momentum of El Gouna and Makadi Heights
