Orascom Development Holding AG / Key word(s): Half Year Results/Half Year Results
17-Aug-2021 / 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 1H 2021.
Orascom Development Holding achieves net profit of CHF 5.2 million in 1H 2021.
Altdorf, 17 August 2021 - Orascom Development Holding (ODH) continued to achieve good results in the first half-year of 2021 supported by a solid performance of the real estate segment and efficient cost management. The Group's top line revenue growth was enabled by improved market sentiments, supported by expectations of a gradual economic recovery, and a healthy housing demand for our real estate products. The momentum driven by our real estate segment led to a net profit of CHF 5.2 million, despite the ongoing headwinds from Covid-19 affecting the hospitality business.
Revenues were up 37.5% to CHF 225.7 million and Gross profit reached CHF 70.5 million (1H 2020: CHF 43.6 million). We were not only able to maintain our healthy gross profit margins, but increase it to 31.2%, (1H 2020: 26.6%). The Group continued to manage its costs successfully during the period with smart spending initiatives across the board. SG&A expenses decreased by 4.2% to CHF 18.3 million in 1H 2021. Adj. EBITDA surged by 113.2% to CHF 58.0 million (1H 2020: CHF 27.2 million), and EBITDA also increased by 160.3% to CHF 49.2 million compared to the same period last year. Finance cost decreased by 8.4% to CHF 16.4 million as a result of the decrease in Libor and Corridor rates. The Group reported a net profit of CHF 5.2 million vs. a loss of CHF 19.2 million in 1H 2020. ODH continued its prudent cash management and business optimization initiatives, further fortifying the Group's balance sheet and maintaining an enhanced liquidity stance. Total cash & cash equivalents* balance reached CHF 219.7 million, total debt was CHF 453.5 million and net debt reached CHF 233.8 million.
Topline performance remained strong, benefitting primarily from the robust growth in our real estate segment in addition to the slight recovery in the hotel's business. Revenues were up 67.6% to CHF 119.3 million in Q2 2021 compared to CHF 71.2 million in Q2 2020, resulting from the acceleration of our construction activities. Gross profit increased by 73.6% to CHF 34.9 million in Q2 2021 with a gross margin of 29.3% vs. CHF 20.1 million and a margin of 28.2% in Q2 2020. Adj. EBITDA was up by 139.2% to CHF 28.7 million with a 24.1% margin. Bottom line performance remained positive for the second consequent quarter, reaching CHF 2.2 million vs. a net loss of CHF 15.0 million in Q2 2020.
Group Real Estate Segment: Sales increased by 45.1% to CHF 278.2 million in 1H 2021 and revenue grew by 90.6% to CHF 171.2 million compared to 1H 2020.
Real estate segment continued its excellent operational and financial results. Net real estate sales reached CHF 278.2 million, an increase of 45.1% vs. CHF 191.8 million in 1H 2020, driven by an increased speed of construction across our destinations. Real Estate revenues increased by 90.6% to CHF 171.2 million in 1H 2021 (1H 2020: CHF 89.8 million). Adj. EBITDA increased by 140.4% to CHF 71.4 million (1H 2020: CHF 29.7 million). Total deferred revenue from real estate that is yet to be recognized until 2026 increased by 25.5% to CHF 668.0 million in 1H 2021 and total real estate portfolio receivables increased by 40.4% to CHF 936.7 million in 1H 2021.
*Includes CHF 4mn of treasury bills
Group Hotels Segment: Positive signs of demand uptick witnessed in the second quarter.
The results for 1H 2021 are not entirely comparable to the results for 1H 2020 given that operations of our hotels were suspended starting mid-March 2020; until almost end of Q2 2020. Like the global hospitality industry, our hospitality business remains the hardest hit segment due to widespread travel restrictions and lockdowns. While the global economic activity continues to recover from depressed levels as many governments partially ease lockdown restrictions, resurgent Covid-19 outbreaks in some countries pose downside risks. We have seen signs that there is a significant amount of pent-up demand, and we look forward to welcoming travelers in increasing numbers to our 33 hotel properties around the world. As we did in 2020, ODH continues to keep a close eye on protecting its cash and lower hotel operating costs, which mitigated the impact of disruptions on the liquidity position of these assets. As vaccine deployment accelerated and lockdowns eased across the nations, our portfolio continued to gather revenue momentum through Q2 2021 whereby revenues were up by 9.6x to CHF 16.4 million with a positive Adj. EBITDA of CHF 0.3 million (Q2 2020: -CHF 8.1 million). During 1H 2021 revenues of the segment were down by 27.9% to CHF 26.9 million, with a negative Adj. EBITDA of CHF 2.2 million.
Group Town Management Segment: Enhanced performance resulted from the successful restructuring implementation.
Town Management continued its positive performance since the beginning of the year and managed to report a solid set of results, successfully securing a solid recurring revenue stream to the Group, despite the ups and downs of the tourism cycles. Revenues in 1H 2021 were up by 21.1% to CHF 27.6 million while Adj. EBITDA reached CHF 1.7 million in 1H 2021 vs. the negative CHF 0.5 million in 1H 2020. The enhanced performance of the segment resulted from the successful restructuring implementation that took place since the beginning of the year.
Details on Destinations
El Gouna, Red Sea
Net real estate sales increased by 57.5% to CHF 117.5 million (1H 2020: CHF 74.6 million) and average selling prices increased by 4.2% to CHF 3,530/sqm. We added new inventory of USD 22 million in "Cyan", a real estate project offering a mix of standalone units. We continued to accelerate our construction progress and managed to deliver 193 units to date out of the planned 278 units for the year. Real estate revenues increased by 30.8% to CHF 78.2 million in 1H 2021 (1H 2020: CHF 59.8 million).
El Gouna hotels are still impacted by Covid-19. 1H 2021 hotels revenue were still down by 1.3% to CHF 15.1 million, when compared to 1H 2020, because our hotels operations for the 1Q of 2020 were operating normally and Covid-19 restrictions started to come into effect only in March 2020. Nevertheless, immediate implementation of cost saving, and cash preservation measures resulted in an overall positive GOP of CHF 4.2 million in 1H 2021 (1H 2020: CHF 1.6 million) and occupancy rates reached 29% in 1H 2021, with local business representing 95% of our guest base. On a positive note, the government had allowed hotels to operate with a 70% capacity starting July 4, 2021 (up from 50%).
Town management continued its positive momentum backed by increase in extended-stay from El Gouna homeowners in addition to the successful restructuring implementation. Revenues were up by 24.6% in 1H 2021 to CHF 23.3 million (1H 2020: CHF 18.7 million). Total revenues for El Gouna were up 16.4% to CHF 116.6 million in 1H 2021 (1H 2020: CHF 100.2 million).
O West, Egypt
Net real estate sales reached CHF 80.2 million in 1H 2021 vs. CHF 92.5 million in 1H 2020. It is worth mentioning that 1H 2020 sales figures included CHF 31.1 million of commercial sales. Excluding those commercial sales, net sales would have increased by 30.6% to CHF 80.2 million in 1H 2021 vs. CHF 61.4 million in 1H 2020. We also managed to increase our average selling prices by 15.1% to CHF 1,642/sqm. We managed to increase O West Club membership fee by 20.6% to CHF 10.5k, securing a steady recurring income flow to the destination. Total revenues of O West increased by 202.1% to CHF 42.3 million (1H 2020: CHF 14.0 million) on the back of the accelerated construction progress.
Makadi Heights, Egypt
Makadi Heights continued to record stellar operational and financial results with net sales up 4.8x to CHF 33.8 million in 1H 2021 (1H 2020: CHF 7.1 million). We also increased our average selling prices by 69.1% to CHF 1,708/sqm. Real estate revenues increased by 28.2x to CHF 14.1 million in 1H 2021 benefiting from the continuous acceleration in construction pace. Total revenues of the destination increased by 12.3x to CHF 14.7 million in 1H 2021 (1H 2020 CHF 1.2 million).
Hawana Salalah, Oman
The destination continues to be profoundly impacted by the restrictions being imposed by the government due to Covid-19. Hotels' occupancy reached only 5% in 1H 2021 due to locally enforced lockdowns. Two hotels are opened out of the three (Al Fanar and Juweria). Hotel's revenue were down 94% to CHF 0.8 million (1H 2020: CHF 13.3 million) and real estate revenues reached CHF 9.9 million (1H 2020: CHF 13.2 million). Real estate sales decreased by 15.5% to CHF 7.1 million (1H 2020: CHF 8.4 million). Total revenues from Hawana Salalah decreased by 57.0% to CHF 11.9 million in 1H 2021 (1H 2020: CHF 27.7 million).
Jebel Sifah, Oman
Jebal Sifah continued to act as a gateway for the residents of Muscat. Net sales were up 4.2x to CHF 20.8 million in 1H 2021 (1H 2020: CHF 4.9 million). Total real estate revenues increased by 7.7x to CHF 13.8 million in 1H 2021 (1H 2020: CHF 1.8 million). In August 2021, we launched a new real estate project "Sifah Oasis" offering standalone units with an inventory value of c. CHF 18.0 million. The new hotel packages that were designed to cater to the local market waved in favour, whereby occupancy rates reached 40% coupled by a 33.3% increase in hotels' revenue to CHF 0.8 million in 1H 2021. Total revenues for Sifah increased by 372.7% to CHF 15.6 million in 1H 2021 (1H 2020: CHF 3.3 million).
Luštica Bay, Montenegro
The destination witnessed extra-ordinary progress during 1H 2021. The additional activities to enhance the overall appeal of the destination, supported by the regional sales efforts as well as favorable weather conditions, contributed to the general improvement. 1H 2021 sales reached CHF 18.3mn, up 5.1x compared to CHF 3.6 million in 1H 2020 and real estate revenues increased by 60% to CHF 12.8 million (1H 2020: CHF 8.0 million). Hotel's occupancy rate started to pick up to 29% in 1H 2021 compared to only 4% in 1H 2020. Total revenues for Luštica increased by 73.3% to CHF 14.9 million (1H 2020: CHF 8.6 million).
Update on compensation claim of the Egyptian Ministry of Environment
On 3 August 2021, ODH announced that it had received a notice from the Environment Protection Agency of Egypt's Ministry of Environment of a claim for environmental compensation in relation to the group's El Gouna destination without further substantiating the claim or its basis. The Ministry of Environment has provided no further information or supporting documentation since and has failed to respond to ODH's repeated requests for further information and clarification. ODH will continue to make appropriate inquiries and take any required action and will provide updates in case of any relevant developments.
Outlook 2021: Path towards a sustained recovery
Looking into 2021, visibility remains limited as demand may still be impacted by the ongoing fluid circumstances resulting from the pandemic and the timing of the vaccine roll-out. Accordingly, ODH still stands with its earlier position and abstains from providing full-year guidance on its 2021 results; however, we remain diligent in providing updates of the evolving situation during all our quarterly results calls and market communications as needed.
We enter the second half of the year with strong momentum and are positioned to grow and continue to deliver strong returns. For the second half of the year, we are planning to continue accelerating our real estate construction, ultimately increasing the real estate segment's revenues. We will also leverage on our town management's operation and steady growth. 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 start-ups and entrepreneurs, encouraging them to come set ground in our destinations.
For the hotels segment, in July 2021, the Russian government announced that airlines can resume charter flight operations to the Egyptian resorts, after a travel ban that lasted for over 5 years. The resumption of flights is expected in August 2021. While the Russians were not the typical guests in El Gouna, nevertheless, the return of Russian guests is expected to support occupancy rates at competing destinations (including Hurghada, a typical market for the Russians), which should have a positive spillover effect on both occupancy and room rates at El Gouna, hence, indirectly supporting the destination. That said, we are planning to start a more focused approach to target Russian tourists to capitalize on their return, until other core markets are actively back. Moreover, this step should also encourage less stringent travel restrictions from other countries, further supporting occupancy levels over the medium-term. Additionally, the Group will continue to keep a close eye on protecting its cash balance and monitoring its costs. Today, all our efforts are focused on the recovery of the tourism sector. With global business trends improving slightly now with the ramp-up of the vaccine. We are optimistic and confident that tourism will return to some level of normality.
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.
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End of ad hoc announcement