ODE's profits grew by 34.0% to EGP459.8mln in Q4 2020
Orascom Development Egypt's revenues for Q4 2020 reached EGP 1.72 billion, up by a remarkable 30.7% vs. Q4 2019 and 28.3% vs. Q3 2020.
The increase was driven by the accelerated construction pace across all destinations, in addition to the enhanced operational performance in the town management segment of El Gouna.
Gross profit expanded 34.0% y-o-y in Q4 2020 to EGP 459.8 million, with a margin of 26.7% vs. 26.0% in Q4 2019 and 27.7% in Q3 2020. Operating EBITDA increased by 45.1% to EGP 470.2 million.
EBITDA reached EGP 399.6 million in FY 2020. Net profits were up 4.6%, despite the headwinds from Covid-19 to EGP 213.9 million.
ODE closed FY 2020 with total consolidated revenues of EGP 5.0 billion, up 7.0% y-o-y despite headwinds from the prevailing Covid-19 pandemic affecting our hospitality business segment. Real estate revenues reached EGP 3.3 billion, growing by a sizeable 37.3% y-o-y, supported by the speeding of the construction activities across all our destinations.
Gross profit increased by 5.6% to EGP 1.41 billion in FY 2020 (FY 2019: EGP 1.34 billion). Gross margins came in at 28.4%, broadly in line with last year’s result of 28.8%, confirming the company’s ability to successfully mitigate cost pressures through these challenging circumstances. Operating EBITDA remained stable and stood at EGP 1.37 billion, compared to same period last year and EBITDA reached EGP 1.3 billion (FY 2019: EGP 1.6 billion).
Net profit reached EGP 571.3 million in FY 2020 (FY 2019: EGP 705.6 million). Bottom line figures includes FX losses of EGP 43.9 million compared to FX gains of EGP 228.4 million in FY 2019. ODE continued its prudent cash management ending the year with a cash balance of EGP 2.1 billion, an increase of 79.6%, compared to the EGP 1.1 billion in FY 2019. Total debts reached EGP 3.5 billion, while net debt reached EGP 1.5 billion (FY 2019: EGP 2.1 billion). Our net debt to operating EBITDA went down from 1.6x in FY 2019 to 1.1x in FY 2020. ODE’s management continue to carefully monitor the situation and believes that the Company’s proven track record, strong financials and disciplined approach will continue to allow ODE to flourish during those challenging circumstance.
The Company continued its positive sales pacing in Q4 2020. New sales reached EGP 1.8 billion, a growth of 32.3% compared to EGP 1.4 billion in Q4 2019 and 17.3% increase over the EGP 1.5 billion reported in Q3 2020. Growth in sales during the quarter was supported by recovery in home buying transactions following the easing of restrictions and precautionary measures imposed in relation to Covid-19, an increase in the secondary homes demand on Red Sea area, and an uptick in our O West sales. Net real estate sales for FY 2020 were down 10.7% to EGP 6.2 billion (FY 2019: EGP 6.9 billion). It is worth mentioning that last year’s sales figures included the initial successful launch of O West. O West continued to be the group’s largest contributor to new sales (54%), followed by El Gouna (39%) and Makadi Heights (7%).
We were also able to continue increasing our average selling prices since the beginning of the year across all destinations. Remaining committed to timely deliveries, we picked up the pace of construction in 1H 2020 after taking necessary precautions to ensure health and safety standards on construction sites were met. ODE delivered 254 units in 2020 across its projects, meeting all our planned contractual delivery dates allowing us to leverage the strength of our balance sheet and cash flows to deliver strong performance in turbulent times. Revenues increased by 37.3% to EGP 3.32 billion (FY 2019: EGP 2.42 billion). Operating EBITDA also increased by 34.4% to EGP 1.17 billion in FY 2020. Total deferred revenue from real estate that is yet to be recognized until 2024 increased by 24.3% to EGP 8.7 billion (FY 2019: EGP 7.0 billion). Real estate cash collections increased by 25.0% to EGP 3.1 billion vs. EGP 2.4 billion in FY 2019, which resulted in an increase of our total real estate portfolio receivables by 32.1% to EGP 11.7 billion (FY 2019: EGP 8.8 billion). It is important to highlight that cancellations remained low, reaching only 3% of gross sales and delinquencies stood at 4%.
Group Hotels’ results dramatically impacted by the global pandemic
Operational and financial results of the company’s hotel segment during FY 2020 have been significantly impacted by the outbreak of Covid-19 pandemic. The pressure on the segment continued throughout Q4 2020 on the back of weak international travel. While Egypt has restored international air flights on 1 July 2020, only 1.4 million tourists visited Egypt since July and until the end of December, bringing the total number of tourists who visited Egypt in 2020 to 3.7 million tourists compared to 13.6 million tourists in 2019.
Currently, our hotel business is highly dependent on local tourism while still operating at the 50% capacity limit instated by the Government.
Revenues of the segment came in at EGP 499.0 million in FY 2020, detracting by 67.0% y-o-y. The revenue squeeze started in Q2 2020 due to the partial closures and insignificant occupancies. With the re-opening of the hotels and the 50% occupancy regulation, we started focusing our efforts to tailor products that cater for the local demand. Improvement was witnessed during the second half of the year with revenues reaching EGP 121.0 million in Q4 2020, yet still remained 68.2% below Q4 2019 figures. GOP for the segment remained positive reaching EGP 2.3 million compared to EGP 600.5 million in FY 2019. Operating EBITDA of the segment came in at EGP 3.7 million in FY 2020 compared to EGP 516.3 million in FY 2019.
Destination management segment has maintained its solid ground and continued to secure its recurring revenue stream to the group. Revenues in Q4 2020 increased by 17.9% to EGP 206.2 million (Q4 2019: EGP 174.9 million) while operating EBITDA reached EGP 19.3 million in Q4 2020. The increase in revenues was a result of the increase in revenues generated from the utility functions which includes water and electricity, whereby more Gouna homeowners preferred to work from Gouna rather than in Cairo and thus increasing their utility usage. We were able to resume some of our events as of the 21st of September 2020 and were able to successfully host the 4th edition of El Gouna Film Festival from the 23rd till the 31st of October 2020. Total revenues for FY 2020 remained stable at EGP 684.9 million.
On November 23rd, 2020, ODE signed a medium-term loan agreement to refinance and upsize its outstanding debt with the equivalent of USD 265 million, 7 years term loan with a 2.5-year grace period. ODE intends to use the proceeds as follows: 1) Up to USD 215 million, to refinance outstanding balances of its debt to relieve the company from upcoming debt commitments. 2) An additional tranche of up to USD 50 million (in Egyptian Pounds), will be available for drawdown over 2 years for future growth opportunities at the discretion of the group including any planned capex for roll out of new rooms and renovation of hotels in the group’s destinations. The loan agreement has enabled the Company to optimize its financing terms, extending its tenors and improving its overall financial stance.
In December 2020, ODE sold its 35.25% stake in “New City Housing & Development” previously known as Orascom Housing Communities (OHC), for an amount of EGP 128.6 million.
Outlook 2021: Path towards a sustained recovery
The necessary drastic measures undertaken by governments and countries worldwide, and the consistently changing situation amid Covid-19, makes it impossible to provide an accurate outlook on its ramifications for 2021 operational and financial results. Accordingly, the group decided to abstain at the time being from providing guidance for 2021; however, ODE intend to provide an update of the evolving situation during all our quarterly results calls and market communications as needed.
ODE entered 2021 with a positive momentum following two quarters of sequential improvement and remain confident in the operational and financial stance of the group which will allow it to deliver on its targets and plans for the year. The group implemented several initiatives to keep the performance in 2021 at its maximum level.
ODE also began heavily exploring domestic business, with new product development and distribution targeting Egyptian nationals.
ODE started with El Gouna where ODEwasable to increase the destination’s hotel’s occupancies due to improving local demand. A close eye was kept on the segment’s cash as well, particularly account receivables for the hotels business, and ODEbegan identifying new opportunities to reduce the group’s reliance on tour operators and increase independent revenue streams at hotels.
Our town management segment is a reliable source of cashflow, ODEconsider town management essential to finance ODE’s growth and shield ODE’soperations from cyclical slowdowns in the sellable development business. Relevantly, ODEwill also provide attractive offerings for start-ups and entrepreneurs.
El Gouna, Red Sea
In November 2020, new hotel packages were introduced to attract the affluent Egyptian clientele travellers who are not much familiar with the destination capitalizing on the suppressed need for travel. Q4 2020 revenues reached EGP 112.9 million up from EGP 89.3 million in Q3 2020 and occupancy rates also improved from 19% in Q3 2020 to 25% in Q4 2020 (Q4 2019: 79%). During FY 2020, revenues decreased by 64.4%, to EGP 447.7 million. Nevertheless, immediate implementation of cost saving, and cash preservation measures resulted in an overall positive GOP of EGP 48.4 million in FY 2020. Occupancy rates for total rooms reached 27% in FY 2020 (FY 2019: 82%).
Destination management continued to be relatively resilient despite Covid-19 impact with revenues up by 1.3% in FY 2020 to EGP 659.7 million. The increase was backed by the increase in revenue generated from utility functions, community services as well as maintenance activities. Whereby more Gouna homeowners preferred to stay in El Gouna instead of staying in Cairo and thus increasing their utility usage. Occupancy rate for “El Gouna Homes” in Q4 2020 reached 59% and for FY 2020 reached 65%.
O West, Egypt – Tremendous growth in first home market during Q4 2020
During FY 2020, we increased the average selling prices by 19.3% to EGP 25,573 per sqm and launched a total inventory of c. EGP 3.9 billion in Whyt and Tulwa. Our newest launch was in February 2021, “Qemet”, a real estate project with a total inventory of EGP 7.5 billion.
Construction of the three schools is expected to start in the first half of 2021, subject to the approval of the respective authorities. Total real estate revenues from O West increased by 64.7% to EGP 916.8 million in FY 2020 (FY 2019: EGP 556.6 million). ODEare finalizing the development of O West Club masterplan, which will be a main add-on to the destination. In 2020, a total of 547 new memberships were added to O West Club (membership fee is EGP 150,000), bringing the total number of memberships in the club to 1,482 memberships, securing a steady recurring income flow.
ODE signed a cooperation agreement with “Telecom Egypt WE” for the implementation of the communications and information technology infrastructure for the destination and finalized the construction of the football court and two tennis courts in the Club House. 2020 witnessed the launch of several new tenant stores at Makadi Heights Mall, Bouza Roll, Circle K and Bus Stop in addition to other essential amenities serving the daily needs of the current residents. Total revenues from Makadi destination increased by 235.7% to EGP 234.3 million (FY 2019: EGP 69.8 million).
Taba Heights, Egypt - Developing and promoting business opportunities with local operators
ODE will continue to reduce cash burn rate and implement several cost savings initiatives while simultaneously making sure to have Taba Heights up and running at full capacity when circumstances improve, and tourists return. In FY 2020, total revenues reached EGP 47.7 million (FY 2019: EGP 219.0 million). Occupancy rate reached 11% compared to 48% in FY 2019. Taba Heights reported a GOP loss of EGP 46.6 million compared to a loss of EGP 4.6 million in FY 2019.
CEO Omar El Hamamsy said:“I am very proud of the way ODE responded to the Covid-19 crisis in 2020. We quickly focused on liquidity, cost management, and execution, while rapidly innovating and ramping all our products. We entered 2021 with a positive momentum following two quarters of sequential improvement. I am confident we are well-positioned for the economic recovery and will continue to deliver solid performance for our shareholders, our customers, and our employees in the short and long term."
