SODIC achieves EGP 2.8 billion of sales driven by strong demand for projects in both West and East Cairo despite limited new launches

Sixth of October Development & Investment Company “SODIC” has released its consolidated operational and financial results for the three months ended 31stof March 2023.

§Gross contracted sales:EGP 2.78 billion;

§Cancellations:21% of gross contracted sales;

§Cash collections:EGP 2.10 billion;

§Timely deliveryof 208 units;

§Revenues:EGP 1.50 billion، up 26% YoY;

§Gross profit:EGP 563 million، up 12% YoY، and reflecting a gross profit margin of 38%;

§Operating profit:EGP 165 million، down 38% YoY، implying an operating profit margin of 11%;

§Net profit after tax and non-controlling interests:EGP 187 million، down 17% YoY، delivering a net profit margin of 13%

Operational Review;

SODIC sold 274 units during the first quarter of 2023، generating gross contracted sales of EGP 2.78 billion. This compares to sales of EGP 3.74 billion recorded during the first quarter of 2022. The YoY drop in sales is mainly attributable to the limited launches in 2023 compared to 2022، as the company had temporarily halted sales during the beginning of 2023 to revisit sales prices amid increasing construction costs. Going forward SODIC will periodically review its selling prices as it seeks to balance maximizing sales with managing cost inflation risk in the current inflationary environment.

Continued strong demand

Gross contracted sales during the quarter were driven by the strong demand for SODIC’s projects in both West and East Cairo. West Cairo projects accounted for 52% of gross contracted sales، primarily driven by the continued strong demand for SODIC’s relaunched 464-acre project، which contributed 39% of the quarter’s sales. On the other hand، East Cairo projects accounted for 48% of SODIC’s first quarter sales، on the back of robust sales on both Villette and SODIC East، which contributed 33% and 13% respectively.

Cancellations of EGP 579 million were recorded during Q1 2023، representing 21% of the quarter’s gross contracted sales. This compares to a cancellation rate of 10% during the first quarter of 2022. The increase in cancellations is mostly due to the company prioritizing the cancellation of units in default، allowing the company to resell these units at current market prices، supporting margins، and increasing total returns.

Net cash collections reached EGP 2.03 billion for the quarter، with delinquencies at 8.2%. This compares to collections of EGP 1.37 billion and a delinquency rate of 8.8% recorded during the same quarter of 2022.

SODIC delivered some 208 units during the quarter، of which 104 were in West Cairo projects، while East Cairo and North Coast projects accounted for 103 and 1 of the delivered units respectively. This compares to 165 units delivered during the same quarter last year.

CAPEX spent on construction during the quarter amounted to EGP 861 million، compared to EGP 634 million spent during Q1 2022.

Financial Review;

Revenues of EGP 1.50 billion were recorded during the quarter، an increase of 26% over EGP 1.20 billion recorded during the first quarter of 2022. Revenues were mainly driven by deliveries in West Cairo projects which accounted for 60% of deliveries by value، led by the commercial project Pavilion which accounted for 32%. East Cairo projects accounted for a further 39%، led by SODIC East which made up 26% of the quarter’s deliveries by value.

Gross profit increased 12% YoY to reach EGP 563 million، implying a gross profit margin of 38%. This compares to a gross profit of EGP 492 million and a gross profit margin of 42% recorded during the first quarter of last year، with a large number of early phase deliveries on SODIC East slightly weighing down the margins YoY.

Operating profit came in at EGP 165 million، implying an operating profit margin of 11%، compared to an operating profit of EGP 267 million and an operating profit margin of 22% recorded during Q1 2022. The YoY drop in operating profit is primarily driven by the direct recognition of increased costs associated with higher sales and backlog execution on the company’s income statement، while the associated revenues will only be recognized upon the delivery of the sold units.

Net profit after tax and non-controlling interests came in at EGP 187 million، implying a net profit margin of 13%، and EPS of EGP 0.53. This compares to a net profit of EGP 226 million، a net profit margin of 19%، and an EPS of EGP 0.64 during the first quarter of 2022، with the increased operating costs weighing down net income in 2023.

SODIC continues to maintain a strong liquidity position with total cash and cash equivalents amounting to EGP 3.32 billion.

Strong cash flow

Bank leverage remains low، with bank debt to equity standing at 0.42x. Bank debt outstanding amounted to EGP 3.16 billion as of 31 March 2023. SODIC has been gradually increasing leverage mainly to enhance returns. Debt to equity amounted to 0.43x at year-end 2022، with EGP 3.16 billion of outstanding debt; and to 0.38x at year-end 2021، with EGP 2.55 billion of outstanding debt.

Total receivables stood at EGP 30.8 billion، of which EGP 6.75 billion are short-term receivables providing strong cash flow visibility for the company. A total of EGP 4.09 billion of receivables are reported on the balance sheet، reflecting only the receivables relating to delivered units already recognized as revenue. On the other hand، some EGP 26.7 billion of receivables related to undelivered units are disclosed in the footnotes.

SODIC’s total backlog of unrecognized revenue stood at EGP 34.4 billion as of 31 March 2023، providing strong revenue visibility for the company.

Commenting on the results Ayman Amer SODIC’s General Manager said “We have witnessed very healthy demand for the limited launches that we have released during the quarter. We will continue bringing forward releases across our projects during the year as we closely monitor the macro-operating environment and its impact on our pricing strategies.”