ODH ("Orascom Development Holding") (SIX ODHN.SW) has released its consolidated financial results for Q1 2020.
Orascom Development Holding achieves revenues of CHF 92.9 million and increases real estate sales by 1.8% to CHF 107.7 million despite Covid-19 impact.
- Total revenues down 5.3% to CHF 92.9 million vs. CHF 98.1 million in Q1 2019.
- EBITDA of CHF 13.9 million in Q1 2020, with a 15.0% margin.
- Net real estate sales increased to CHF 107.7 million compared to CHF 105.8 million.
- Real Estate receivables portfolio increased by 73.7% to CHF 651.4 million in Q1 2020.
- Real Estate deferred revenue balance also grew by 76.6% to CHF 530.2 million.
- Signed 3 School Development Agreements in O West, securing CHF 32.2 million of cash inflows to ODH.
- Cash flows from operations increased to CHF 13.9 million vs. CHF 7.6 million in Q1 2019 and cash balance reached CHF 183.3 million.
- Secured financing for CHF 21.8 million to kick-start project in Eco Bos, with unit sales starting in June 2020.
Altdorf, 15 June 2020 - 2020 has been a challenging year not only for ODH but also for the whole world. We kicked off 2020 on a positive note and on a path towards stronger and better operational performance across all business segments; however, the momentum was cut short by the unprecedented circumstances that accompanied the Covid-19 outbreak. Nevertheless, the Group was able to respond quickly to the crisis on hand and put together a well-balanced set of initiatives that are helping us override this crisis and preparing us to come out of it on a stronger note.
Revenues decreased by 5.3% to CHF 92.9 million (Q1 2019: CHF 98.1 million) and gross profit reached CHF 23.4 million (Q1 2019: CHF 30.1 million). Adj. EBITDA stood at CHF 15.2 million (Q1 2019: CHF 20.6 million) while EBITDA reached CHF 13.9 million in Q1 2020 (Q1 2019: CHF 21.7 million). The operating margins were significantly hampered by the complete shutdown of our hotels business as Governments across the world instructed the closure of all hotels in the touristic destinations and suspended flights from and to the destinations where we operate. As a result, ODH reported a net loss of CHF 4.2 million in Q1 2020 compared to a net profit of CHF 1.1 million in Q1 2019.
Preserving our balance sheet and monitoring liquidity was one of the main key focus area since the spread of the pandemic. ODH cash balance reached CHF 183.3 million in Q1 2020. Our debt balance decreased by 0.9% to reach CHF 425.9 million in Q1 2020 (FY 2019: CHF 429.9 million). Net debt balance in Q1 2020 reached CHF 242.6 million. The Group was able to generate more savings in its finance costs in Q1 2020, whereby interest costs decreased by 15.9% to CHF 9.0 million in Q1 2020 (Q1 2019: CHF 10.7 million) and continued to generate positive cash flows from operations, recording an increase to CHF 13.9 million in Q1 2020 compared to CHF 7.6 million in Q1 2019.
Abdelhamid Abouyoussef, Executive Committee member commented;" Despite the disruptions caused by Covid-19, ODH is confident in the underlying resilience of its businesses and operating model. ODH has a strong balance sheet and is confident that its liquidity needs will be well covered during these challenging times. As a Group, we are accelerating our construction activities, committing to make all contractual deliveries on time. May sales figures across our Egyptian destinations look promising, signaling a positive trend in the horizon. I am also optimistic with our hotel's pre-bookings for Q3 onwards in Egypt and Q4 in Oman."
Group Real Estate: Increased deferred revenue portfolio and accelerated our construction works; committing to meeting our contractual delivery obligations.
Net real estate sales for Q1 2020 increased by 1.8% y-o-y to reach CHF 107.7 million in Q1 2020 (Q1 2019: CHF 105.8 million), despite the daring impacts brought by Covid-19 pandemic. The increase in sales was driven mainly by the increase in sales of our Egyptian destinations (El Gouna and O West). This solidifies the lasting belief that Egyptians still view real estate as a safe haven for their wealth. Total number of contracted units reached 309 in Q1 2020. O West, continued to be our largest contributor to new sales (56% of sales), followed by El Gouna (26% of sales), Oman (10% of sales), Makadi Heights (5% of sales) and finally Lustica Bay and Fayoum (3% of sales). Revenues increased by 6.7% to CHF 44.3 million in Q1 2020 (Q1 2019: CHF 41.5 million) on the back of the increased construction progress across all destinations. EBITDA decreased by 3.4% to CHF 11.5 million in Q1 2020 (Q1 2019: CHF 11.9 million), as we sold more apartment units this year compared to more villa sales with immediate land revenues in Q1 2019. Total deferred revenue from real estate that is yet to be recognized till 2023 continued with its uptrend progress and recorded a solid 76.6% increase to CHF 530.2 million in Q1 2020 (Q1 2019: CHF 300.2 million) which provides a guideline on where the company stands and its profitability during the coming period. While total real estate portfolio receivables also increased by 73.7% to CHF 651.4 million (Q1 2019: CHF 375.0 million).
Group Hotels: A good start turns into a challenging year for the tourism business segment.
With efforts focused on promoting quality standards and product appeal for accelerated sales, ODH hotels started the year on a positive note whereby, hotel revenues and occupancy rates in January and February 2020 remained on an impressive growth and in line with our budgeted figures. However, Covid-19 pandemic began to affect our hotels operations significantly, since the beginning of March, as governments globally took actions to encourage social distancing by imposing travel restrictions and flight suspensions around the world. In addition to instructing the closure of hotels in the touristic destinations and halting all events, conferences, restaurants, and cafes and imposing a partial curfew on its citizens. As a result, total hotels revenue decreased by 22.5% to CHF 35.8 million in Q1 2020 (Q1 2019: CHF 46.2 million). GOP also declined by 40.3% y-o-y, from CHF 20.1 million in Q1 2019 to CHF 12.0 million in Q1 2020. The segment's EBITDA also declined by 43.9% to CHF 9.6 million in Q1 2020 (Q1 2019: CHF 17.1 million). We used the time of the temporary suspension of the hotels operation to monitor WHO guidelines, government mandates and public health advancements to tailor and implement sanitation and staff training programs that ensure our hotels continue to provide a safe haven for our guests and staff. On a positive note, in Egypt, we have started to receive bookings for the 2020 winter season from our European feeder markets, with numbers gradually improving over the last weeks. Demand from our tour operator partners for Q4 2020 in Oman also continues to remain strong and our hotels in Andermatt are operating with promising occupancies since the 8th of May.
Group Destination Management: continues to grow adding more recurring revenues to the Group
The Destination Management segment continued to grow significantly and securing more recurring revenue streams to the Group despite the harsh times the world is passing through. Revenues continued its upward trend and increased by 23.1% to CHF 12.8 million in Q1 2020 (Q1 2019: CHF 10.4 million) and EBITDA recorded a CHF 0.9 million in Q1 2020 compared to a loss of CHF 1.1 million in Q1 2019. The notable increase in revenues and EBITDA was a result of the increase in revenues generated from the utility functions which includes water and electricity, whereby more Gouna homeowners preferred to quarantine there than in Cairo and thus increasing their utility usage. Our rental portfolio increased; boosted by the marina revenues along with urban and community and maintenance services.
Re-opening some of our Hotels
In Egypt, the government has officially allowed the re-opening of hotels and resorts on 15 May 2020 for domestic tourism, after being closed from March 19, 2020. Hotels were permitted to operate at a maximum capacity of 25% until 1 June 2020 then at 50% by 2 June 2020. The safety measures were in accordance with the guidelines of the World Health Organization (WHO), ensuring quality of personal protective tools and sterilization materials. Accordingly, ODH opened 25% of its hotel inventory (represented in 513 hotel rooms) in El Gouna starting from 17 May and opened 126 rooms in Taba Heights and 13 rooms in Fayoum Hotel on 21 May. Despite the short timeframe from when the Government announced the reopening of the hotels, we still witnessed a fast pick up in our hotel's bookings. Whereby out of the 25% inventory we opened in El Gouna, we were able to secure an occupancy of 59% during the feast break and a 40% occupancy in Taba Heights.
In Switzerland, the SkiArena Andermatt-Sedrun was forced to stop operating immediately on March 13, 2020. Additionally, our hotels in Andermatt were closed starting March 17, as per the government instructions. The Chedi and Radisson Blu hotels were able to reopen their doors on 8 May 2020 with positive occupancies, the golf course opened on the 11th of May with a strong opening season, and the SkiArena is deemed to reopen its facilities for the summer business beginning of July.
The Group remains diligent in preserving the health and well-being of all its colleagues, guests, customers, and the communities in which our destinations operate. This remains our key priority and we are doing all that we can to secure a safe work and living environment. We already have high hygiene and safety standards in all our destinations and offices, and we have implemented extra measures and precautions in line with guidelines from the health authorities. While the company is taking prompt action to adapt its operations and cost base to safeguard profitability.
ODH was ready to respond effectively and quickly implement the necessary precautionary measures that enable us to reduce spending and preserve cash to ensure stability of the Group's destinations, in order to enable the destinations to resume their operations and planned investments once the business is back to meet the Group's planned strategic and financial targets. Meanwhile, thanks to a solid liquidity position, management is fully confident of ODH's ability to meet all upcoming obligations. The strength of our balance sheet affords us room for flexibility and will be key in seeing us through these turbulent times.
The Group still stands with its earlier position and abstains from providing full-year guidance on its 2020 results; however, we remain diligent in providing updates of the evolving situation during all our quarterly results calls and market communications as needed. We have started accelerating our construction activities in May, catching up over lost times and making sure we respect all contractual delivery obligations dates and in parallel to hedge against expected inflation. We have witnessed a pickup in our real estate sales momentum for our destinations in Egypt, whereby total contracts and reservations reached CHF 34.6 million in April and then more soundly in May to CHF 46.5 million compared to CHF 59.2 million in May 2019, signalling a positive trend in the horizon.
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We are also looking forward for the gradual resumption of international flights across all our destinations. Last minute pick-up will continue to dominate the scene, yet the recently introduced flexible booking terms and the Group's comforting message outlining the major enhancements in its hygiene and sanitation protocol with news that this protocol is being audited by major international accreditation firms, have positively impacted the booking situation on the short run.
Finally, we are still strongly executing on our earlier communicated plans of accelerating the monetization of our land bank in 2020 and after. We believe that the rapid execution of our land monetization will help the Group unlock its hidden/discounted land bank value to the market and will provide us with additional cash for speeding up the developments of our destinations.
Details on Destinations
El Gouna, Red Sea
El Gouna hotels were negatively affected by the travel restrictions and flight suspensions due to Covid-19 pandemic. All El Gouna hotels were closed starting from March 19, 2020 until May 17, 2020, as per the Egyptian government instructions. Total revenues decreased by 13.1% to CHF 14.6 million in Q1 2020 (Q1 2019: CHF 16.8 million). GOP also decreased by 31.4% to CHF 5.9 million in Q1 2020 (Q1 2019: CHF 8.6 million). The hotels TRevPAR reached CHF 59 in Q1 2020 (Q1 2019: CHF 75). Occupancy levels were also affected in the quarter standing at 62% in Q1 2020 (Q1 2019: 83%). ARR increased by 4.8% to CHF 66 in Q1 2020 (Q1 2019: CHF 63).
On the other hand, our net real estate sales increased by 12.2% to CHF 27.6 million in Q1 2020 (Q1 2019: CHF 24.6 million). Throughout 2020, we added new inventory in "Ancient Sands Villas", "Sabina" and "Cyan" amounting to CHF 45.5 million along with our latest project launch; "Fanadir Marina" new high-end apartments. We successfully increased the average selling prices and reduced the number of units sold, to maintain the same level of quality that El Gouna is known for.
The average selling price per m2 increased by 36.7% to CHF 3,323 and the number of units sold decreased by 18.8% to 52 units in Q1 2020. We are accelerating our construction activities and remain committed to the unit's contractual delivery dates. Construction is speeding up in Abu Tig Hill apartments, Tawila Phase 2 and 3, Um Jammar and Fanadir Bay 2 projects. Real estate revenues increased by 45.4% to CHF 23.7 million in Q1 2020 (Q1 2019: CHF 16.3 million).
Destination management segment continued its positive performance with revenues increasing 23.5% to CHF 10.5 million in Q1 2020 (Q1 2019: CHF 8.5 million). The increase was backed by the increase in revenue generated from utility functions such as water or electricity generation, rental portfolio, marina, urban and community services as well as maintenance activities. whereby more Gouna homeowners preferred to quarantine there than in Cairo and thus increasing their utility usage. Overall, total revenues of El Gouna increased by 17.3% to CHF 48.8 million in Q1 2020 (Q1 2019: CHF 41.6 million).
First home market: O West, Egypt
O West continued to deliver solid sales figures driven by our strategy to capture the demand with a tailored product mix suited for today's market dynamics. In January 2020, we launched two new phases in O West "Whyt" and "Tulwa" with total inventory of CHF 182.3 million. The two phases include town and twin houses, villas, and apartments. Net real estate sales increased by 13.8% in Q1 2020 to reach CHF 60.3 million (Q1 2019: CHF 53.0 million). While, total revenues of O West reached CHF 3.9 million in Q1 2020 (Q1 2019: CHF 7.9 million) since we sold more apartments in Q1 2020 compared to more villas in Q1 2019 with land revenue recognition. It is worth mentioning that Q1 2020 includes CHF 18.5 million from commercial sales (schools development agreements). We managed to sign three school development agreements, one with a private investor to develop Kent College and a second one with Cairo for Investment & Real Estate Development (CIRA) to develop Saxony International School (SIS) and British Columbia Canadian International School (BCCIS) and finally the third one with Nermine Ismail (NIS) to develop two new international Schools. The educational zone transactions that we managed to successfully conclude since the beginning of 2020 resulted in securing a total of c. CHF 32.2 million of cash inflows to ODH. Revenues from the school development agreements will start to kick-in from Q2 2020.
Construction has started and is progressing in full force and has continued through the Eid break with the first unit skeletons already being visible. A taskforce was established to create a proactive plan that tackles Covid-19 concerns and uncertainties. All execution decisions were administered while maintaining the health and wellbeing of our employees, contractors, consultants, and relevant stakeholders as our top priority.
Hawana Salalah, Oman
In Oman, the Government suspended commercial flights to and from Italy (one of our top market provider) from Salalah Airport starting March 1, 2020 as a result of Covid-19 pandemic spread. Additionally, all major tour operators cancelled their operation as of March 11, 2020. In Q1 2020, Oman Hotels reported a revenue decline of 21.8%, from CHF 17.0 million in Q1 2019 to CHF 13.3 million in Q1 2020. GOP also declined by 32.6%, from CHF 8.6 million in Q1 2019 to CHF 5.8 million in Q1 2020. All Hotels in Salalah are closed with plans to be opened during Q3 2020. Additionally, we are progressing with the construction of the new 400-rooms, 5-star hotel with plans for soft opening in Q4 2021.
The closure of the hotels had a negative impact on our net real estate sales, since a lot of our sales are to foreigners which were no longer present in the destination. Sales dropped by 29.9% to CHF 6.8 million in Q1 2020 (Q1 2019: CHF 9.7 million). Nevertheless, we continued with our construction progress. Forest Island construction is well underway with plans to start the delivery of 202 units in September 2020 and full project construction completion by December 2020. Additionally, the construction of the real estate projects Lily and Laguna Gardens are on schedule with the on-time delivery in 2021. Real Estate revenues increased by 38.4% to CHF 11.9 million in Q1 2020 (Q1 2019: CHF 8.6 million). Overall, total revenues of Hawana Salalah remained stable at CHF 26.0 million in Q1 2020 compared to same amount last year.
Luštica Bay, Montenegro
The Chedi Hotel is still closed and is planning to reopen on the 15th of June, as per the Government instruction and thus, we expect to see a recovery of leisure traffic to the area during the summer season. Net real estate sales declined by 40.8% to CHF 2.9 million in Q1 2020 (Q1 2019: CHF 4.9 million). In the Centrale area, construction works continued on the two new apartment buildings that are well advanced and due to be delivered to their owners by Q3 2020. Additionally, we are progressing with construction of Marina Village apartments, Townhomes and Villas with plans to start delivering the units to clients in Q2 2020, as scheduled. Real estate revenues reached CHF 2.9 million in Q1 2020 (Q1 2019: CHF 3.5 million). Overall, total revenues from Luštica Bay reached CHF 3.2 million in Q1 2020 (Q1 2019: CHF 3.8 million).
Jebel Sifah, Oman
Net real estate sales declined by 22.0% to reach CHF 3.9 million in Q1 2020 compared to CHF 5.0 million in Q1 2019. In Jebel Sifah, over 60% of the 150 properties in Jebel Sifah Heights apartment have been handed over successfully, as well as the completion of landscaping and amenities. Construction of Phase I of The Beachfront project will commence in Q4 2020. Total revenues from Sifah destination reached CHF 2.3 million in Q1 2020 (Q1 2019: CHF 5.9 million).
Makadi Heights, Egypt
In Q1 2020, we launched two new phases "Bayou" and "Jade". The two phases include fully finished twin villas and apartments with a total inventory of CHF 7.2 million. Net real estate sales reached CHF 5.6 million (Q1 2019: CHF 7.7 million). We are progressing with the construction work of Phase 2 of the project with plans to delivered in 2022. We also finalized the construction of the Football court in the Club House. Real Estate revenues increased by 25.9% to CHF 0.34 million in Q1 2020 (Q1 2019: CHF 0.27 million) and with the speeding up of our construction progress, we are expecting revenues to kick in more over the coming quarters. Destination management revenues increased by 42.1% to CHF 0.3 million in Q1 2020 (Q1 2019: CHF 0.2 million). Total revenues from Makadi destination increased by 22.1% in Q1 2020 to reach CHF 0.83 million (Q1 2019: CHF 0.68 million).
Taba Heights, Egypt
The Group was anticipating an increase in tourist arrivals during 2020, as several European countries had planned to increase charter flights to Taba airport after the German Authorities have removed the travel ban on Taba. We were able to get the wheels tuning and have witnessed increased occupancies in the first two months of the year. However, with Covid-19 spreading in March 2020, the main tour-operating partner, one of the biggest in the East European market, suspended all existing and planned operation starting March 11, 2020. This was also followed by the Government instructions of closing all hotels starting from March 19, 2020. Accordingly, occupancy rate dropped to 28% (Q1 2019: 37%) and TRevPAR decreased by 25% to CHF 12 from CHF 16 in Q1 2019. ARR reached CHF 26 (Q1 2019: CHF 25). As a result, hotels revenue decreased by 21.1% to CHF 1.5 million (Q1 2019: CHF 1.9 million). Total revenue for Taba destination decreased by 22.7% to reach CHF 1.7 million in Q1 2020 (Q1 2019: CHF 2.2 million). We only opened Strand Beach & Golf Resort hotel with 503 rooms after the government has allowed the reopening of hotels and resorts on 15 May 2020 for domestic tourism. Additionally, we stopped the soft renovation across the hotels that we started by end of 2019.
The Cove, UAE
Ras El Kheima destination was already challenged by the general increase in supply and more over with the restrictions imposed by the government as a result of Covid-19 pandemic spread. The hotel reported a 39.3% decline in its revenues to reach CHF 5.1 million, compared to CHF 8.4 million in Q1 2019, with GOP decreasing by 2.0 million from CHF 3.5 million in Q1 2019 to reach CHF 1.5 million in Q1 2020. Occupancy rate for the hotel reached 63% in Q1 2020 (Q1 2019: 77%).
Eco-Bos in Cornwall, United Kingdom
On May 20, 2020 we signed with Shawbrook Bank, a specialist SME lender in the United Kingdom, to finance the construction of its first phase of more than 1,500 energy efficient homes in the sustainable West Carclaze Garden Village community project near St Austell, Cornwall, UK. Shawbrook has agreed to provide a peak debt funding facility of £ 18 million (CHF 21.8 million) for the first stage of the Garden Village project, involving the construction of 296 homes. In total, the overall project could see Shawbrook finance the construction of 1,500 eco-friendly properties. Residential sales for the project will commence in June 2020 and commercial sales will take place in February 2021. This phase is planned to be delivered during Q3 2024 with expected total sales of ca. £82 million (ca. CHF 99 million*). The project, as previously announced, will be cash flow positive in 2020 and profitable in 2022. Estimated cumulative losses before turning into profits, are within the range of ca. £2.0mn - £3.0mn (ca. CHF 2.4 million - CHF 3.6 million) * until 2022.
Additionally, Eco-Bos has signed a construction contract with Moor Manage Ltd. as the main contractor of this project. Morcom Construction Ltd, the groundworks contractor, started on-site in February with "official" groundbreaking in March 2020. Phase 1 is anticipated to be completed in Q3 2024 and will comprise 296 homes adjoining two lakes, a 210-place primary school, community facilities and 4 miles of trails. This first phase uses 196,604 m2 out of the total land bank under option of over 6.5 million m2.
*GBP/CHF rate used as of 12/5/2020.
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. The Group 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. ODH recently launched O West, the latest addition to its portfolio and its first project in Cairo, Egypt, located in the 6th of October City.
Contact for Investors:
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