Orascom Development Holding AG: Solid operational performance despite being affected by the EGP devaluation and rising interest rates

Ad hoc announcement pursuant to Art. 53 LR.

Orascom Development Holding (“ODH”) (SIX ODHN.SW) has released its consolidated financial results for 9M 2023.

Solid operational performance despite being affected by the EGP devaluation and rising interest rates.

Key Highlights of 9M 2023

• Sold 45,350 sqm of land in El Gouna for a total value of CHF 11.5 million (CHF 250/sqm), 55 times its current book value
• Net real estate sales were stable at CHF 468.1 million despite being affected by EGP devaluation
• Total revenues were affected by foreign currency translation, primarily in Egypt and decreased by 8.0% to reach CHF 422.8 million
• Adjusted EBITDA down by 6.4% to CHF 113.3 million with a margin of 26.8%
• Net profit down 17.1% to CHF 27.8 million after incurring FX loss of CHF 6.6 million due to EGP devaluation
• Hotel revenues increased by 23.7% to CHF 124.2 million

Key Highlights of Q3 2023

• Net real estate sales increased by 19.1% to CHF 199.8 million in Q3 2023
• Total revenues were affected by the EGP devaluation and decreased to reach CHF 156.9 million
• Adjusted EBITDA reached CHF 42.5 million with a margin of 27.1%
• Net profit remained positive for the third quarter, reaching CHF 10.2 million

Altdorf, 16 November 2023 – ODH results for the first nine months of the year further demonstrate the management's ability to successfully consolidate value-accretive business and leverage synergies between its destinations while maintaining a profitable core, across all economic cycles, despite being affected by the EGP devaluation hit. An economic backdrop characterized by inflationary headwinds and currency volatility has required us to remain disciplined and agile in our execution. And nowhere is this more evident than in the strong financial performance achieved across the business throughout 2023. Our financial and operational results figures were impacted by the foreign currency translation, primarily in Egypt. The operational performance of our Egyptian subsidiary has significantly increased (revenues and net profits were up by 55% and 33% respectively), noting that the significant devaluation of the EGP had a negative translation effect on our income statement.

Financial Review 

9M 2023:

Revenues were affected by foreign currency translation and were down by 8.0% to reach CHF 422.8 million during 9M 2023. While gross profit reached CHF 125.9 million (9M 2022: CHF 142.1 million) with a gross margin of 29.8% in 9M 2023 vs. 30.9% in 9M 2022. Although operational performance improved in Egypt, the significant devaluation of the EGP had a negative translation effect on our income statement. The CHF 11.5 million land sale incurred in El Gouna and the increase in hotel segment revenues by 23.7% has partially offset the decline in other business segments, mainly in the real estate segment. Adj. EBITDA decreased by 6.4% to reach CHF 113.3 million (9M 2022: CHF 121.1 million), with an improved Adj. EBITDA margin of 26.8% in 9M 2023 vs. 26.4% margin in 9M 2022. The enhanced Adj. EBITDA and margins were on the back of further improvements in our operational efficiencies and signaled our operational excellence despite the global headwinds. Other gains and losses reported a loss of CHF 11.2 million in 9M 2023. The one-off FX translation loss is mainly related to the devaluation of the EGP against foreign currencies. Our share of associates reported a loss of CHF 0.2 million vs. a profit of CHF 11.0 million in 9M 2022. The weakened performance in the associates was mainly driven by the lower performance of our share in Andermatt Swiss Alps. Finance costs increased by 31.0% to CHF 35.9 million (9M 2022: CHF 27.4 million) due to the increase in interest rates. Despite the challenging worldwide market environment, ODH was able to overcome many of these headwinds to end the nine months with a net profit of CHF 27.8 million vs. CHF 33.6 million in 9M 2022. Adjusted net income excluding forex losses or gains along with any non-operational one-off transactions) reached CHF 39.0 million in 9M 2023.

Q3 2023:

Our Q3 2023 results demonstrate the strong resilience of our business, despite the ambiguity witnessed on a global, regional, and local scale. Revenues during Q3 2023 were down by 16.9% to CHF 156.9 million vs. Q3 2022. While our Adj. EBITDA reached CHF 42.5 million (Q3 2022: CHF 54.5 million). Our share of associates reported a loss of CHF 4.3 million vs. a profit of CHF 1.7 million in Q3 2022. The weakened performance in the associates was mainly driven by the lower performance of our share in Andermatt Swiss Alps during the quarter. Our EBITDA also decreased by 8.0% to CHF 41.2 million in Q3 2023. Bottom-line performance remained positive for the third quarter, reaching CHF 10.2 million (Q3 2022: CHF 18.0 million).

Group Real Estate: Net real estate sales up by 0.1% to CHF 468.1 million despite being affected by the EGP devaluation

New real estate sales for Q3 2023 were up by 19.1% to reach CHF 199.8 million (Q3 2022: CHF 167.7 million). That brings our 9M 2023 sales value to CHF 468.1 million, vs. almost the same figure in 9M 2022 despite being affected by the Egyptian currency devaluation. In Egyptian currency, the net real estate sales performance of the Group’s Egyptian subsidiary, ODE, has improved significantly during 9M 2023. Yet, this operational enhancement was not reflected in ODH’s value of contracted units when translated into CHF. In Egyptian Pound, the Egyptian subsidiary’s net real estate sales have increased by c. 80% vs. 9M 2022. In 9M 2023, O West was the group’s largest contributor to new sales during the reported period (40%), followed by El Gouna (31%), Makadi Heights (11%), Lustica Bay (9%), Oman (6%), and West Carclaze in the UK (2%). Real estate revenues decreased by 21.0% to CHF 236.2 million in 9M 2023 and Adj. EBITDA also decreased by 29.8% to CHF 81.9 million in 9M 2023. Total deferred revenue from real estate that is yet to be recognized until 2027 reached CHF 869.1 million (9M 2022: CHF 813.4 million).

Group Hotels: Strong occupancies and significant growth to hotels ARRs, both in EGP and CHF terms, drove hospitality revenue up by 23.7% y-o-y to CHF 124.2 million

The hospitality segment delivered tremendous financial and operational performance during 9M 2023, despite various macro and geopolitical challenges around the globe. On a quarterly basis, our hotels witnessed a very strong summer season with revenues up by 10.6% to CHF 44.0 million (Q3 2022: CHF 39.8 million), pushing our GOP to CHF 17.0 million, a 23.2% increase vs Q3 2022. Accelerating TRevPAR growth expanded our operating leverage and led us to generate CHF 13.1 million from Adj. EBITDA up 37.9% vs. Q3 2022. Strong occupancies and significant growth in hotel ARRs drove our hospitality revenue up by 23.7% y-o-y to CHF 124.2 million during 9M 2023. The Adj. EBITDA figure also increased by 83.2% to CHF 38.1 million, at a 30.7% margin, compared to CHF 20.8 million during 9M 2022 and a margin of 20.7%. The growth recorded during the period was mainly attributable to the well-tailored pricing and marketing strategy implemented across our hotels.

Recurring income commercial assets: benefiting from the increased activities in the different destinations

Our commercial assets segment results were affected by the devaluation of the EGP, with revenues in 9M 2023 down by 15.2% to reach CHF 50.9 million vs. 9M 2022. Adj. EBITDA performed slightly better than the revenue as a consequence of the implementation of a rich calendar of events across destinations which signals our operational excellence and the implementation of our strategy. This improved the quality and profitability of our services. Adj. EBITDA decreased by 14.3% to CHF 6.0 million (9M 2022: CHF 7.0 million).

Details on Destinations

El Gouna, Red Sea:

El Gouna’s figures continued strengthening in EGP but decreased in CHF due to EGP devaluation. New real estate sales during 9M 2023 were down by 12.9% to reach CHF 146.9 million, with average selling prices reaching CHF 3,591/sqm during 9M 23. In EGP currency, net sales grew by 55.7%, while average selling prices were up by 76.1% vs. 9M 2022. On the construction side, our solid construction and accelerated pace keep us on track with our planned delivery of 388 units for 2023 of which 260 have already been delivered. Real estate revenues decreased by 19.4% to CHF 105.6 million vs. 9M 2022. In EGP total real estate revenues have increased 45.9% vs. 9M 2022. During the quarter, we sold 45,350 sqm of land for CHF 11.5 million (CHF 250/sqm). The land’s book value is CHF 0.2 million and was sold at almost 55 times its book value.

Moving to the hotel’s side once again, El Gouna Hotels' proven business model delivered good results and benefited from its leading market positioning and strong ties with leading European tour operators, affording growth in the Hotels’ bottom-line operational and financial results. Occupancy rates during 9M 2023 reached 73% (9M 2022: 69%). Foreigners represented 75% of our total hotels' occupancy during Q3 2023 and 81% for 9M 2023.  Strong occupancies and growth in hotel ARRs drove El Gouna’s hospitality revenue segment up by 8.6% y-o-y to CHF 58.1 million during 9M 2023, in EGP the revenues were up by a whopping 96.5% vs. 9M 2022.

On the other hand, the GOP of the hotels were up by 32.1% to CHF 32.9 million vs. 9M 2022, while ARRs have also increased from CHF 80 in 9M 2022 to CHF 82 in 9M 2023. Moving to the hotel’s development side, we are progressing with the renovation process across (Sheraton and Ocean View) hotels with plans to be finalized before the end of 2023 and started the construction progress for adding 29 new rooms in Casa Cook El Gouna hotel. El Gouna total revenues decreased by 8.5% to reach CHF 211.8 million (9M 2022: CHF 231.5 million). In Egyptian Pound, El Gouna total revenues have increased by 65.4% during 9M 2023.

O West, Egypt:

O West real estate sales figures continued strengthening in EGP and recorded 81.6% but were massively depressed in CHF due to EGP devaluation and recorded CHF 185.7 million of real estate net sales, a 0.2% increase vs. 9M 2022. Average selling prices were at CHF 1,627 per sqm in 9M 2023. In EGP currency, our net real estate sales have increased by 81.6% vs. 9M 2022, while the average selling prices have also increased by 49.1% vs. 9M 2022. On the development side, we are continuing with our strategy of accelerating construction pace and buying raw materials to mitigate possible inflation, with plans to deliver more than 1,000 units before mid-2024. The construction of O West Club is progressing at a steady pace, with plans to become partially operational during the first half of 2024. To date, we have 4,469 members, which will provide a steady recurring income stream to the group. During 9M 2023, O West's total revenues reached CHF 65.4 million (9M 2022: CHF 101.7 million). In Egyptian Pound, O West total revenues have increased by 16.5% during 9M 2023.

Hawana Salalah, Oman:

Our hotels in Salalah continued with their positive performance, with revenues up 72.9% to CHF 28.7 million in 9M 2023 vs. same period last year. On the GOP level, the hotels reported a huge increase of 373.7% to CHF 9.0 million in 9M 2023 vs. 9M 2022. Occupancy rates increased by 21 basis points to 56% in 9M 2023. On the hotel’s development side, we are progressing with the construction of 123 additional rooms at the Al Fanar Hotel, with plans to be finalized before the end of 2023. On the real estate side, net real estate sales reached CHF 19.1 million (9M 2022: CHF 27.7 million). Real estate revenues were up by 13.9% to CHF 13.9 million in 9M 2023. Total revenues from Hawana Salalah increased by 45.1% to CHF 45.7 million, benefiting from the rise in demand for the hospitality industry in Salalah.

Luštica Bay, Montenegro:

Net real estate sales continued with its positive performance recording an increase of 17.9% to CHF 44.2 million (9M 2022: CHF 37.5 million). While our average selling prices have increased by 18.3% to CHF 6,908/sqm. On the construction side, we resumed our construction activities in the Marina Village again starting October after the end of the summer season and we are progressing with the construction of 124 units in the "Centrale", "Marina Village," and "Golf Zone" areas. To date, we managed to deliver 28 units in Centrale, with plans to hand over 34 more units in "Centrale" and 15 units in "Marina Village" during the rest of 2023. On the hotel side, The Chedi Hotel reported a 16.7% increase in revenues to CHF 7.0 million in 9M 2023, on the back of the increase in ARRs which increased by 55.2% to CHF 312 vs. CHF 201 in 9M 2022. Additionally, the hotel reported a positive GOP of CHF 1.8 million up 80.0% vs. 9M 2022. Moving to the commercial asset side, the Town Centre piazza and first retail tenancies are fully operational now. Commercial asset revenues have increased by 3.7% to CHF 5.6 million during 9M 2023. Total revenues from Luštica Bay reached CHF 22.5 million.

Jebel Sifah, Oman:

Net real estate sales decreased by 5.8% to reach CHF 11.4 million vs. CHF 12.1 million in 9M 2022. We managed to increase our average selling prices by 11.3% to CHF 3,104/sqm vs. 9M 2022. Construction progress and real estate deliveries in Jebel Sifah are continuing at a steady pace with real estate revenues increasing by 6.0% to CHF 15.8 million. Hotel revenues were almost stable, recording CHF 1.8 million during 9M 2023. Total revenues for Jebel Sifah increased by 4.9% to CHF 19.4 million in 9M 2023.

Makadi Heights, Egypt:

The destination continued to deliver good sales results despite being hit with the devaluation of EGP. During 9M 2023, real estate sales have increased by 58.7% to reach CHF 52.2 million vs. 9M 2022. While average selling prices per sqm were at CHF 1,379/sqm. Our solid construction and accelerated pace kept us on track with our planned delivery of 400 units planned for FY 2023 of which 342 units have already been delivered to clients. Total revenues from Makadi Heights were down by 7.0% mainly due to devaluation of EGP to reach CHF 17.3 million (9M 2022: CHF 18.6 million).

The Cove, UAE:

The Cove continues to be one of the best-performing hotel destinations for the group. Total revenues increased by 5.0% to CHF 16.7 million (9M 2022: CHF 15.9 million). Occupancy rates increased by 15ppts to reach 76% in 9M 2023 up from 61% in 9M 2022. Operationally, TRevPAR increased by 6.7% to CHF 143, while GOP PAR also increased by 38.7% to CHF 43 vs. 9M 2022. We continued to capitalize on local and regional businesses through targeted sales promotions and marketing campaigns.

Taba Heights, Egypt:

Taba Heights continued with its positive performance, reporting a revenue of CHF 12.6 million, up 72.6% vs. 9M 2022. GOP for Taba Heights hotels also increased by 208.3% to reach CHF 3.7 million during 9M 2023. Our hotels witnessed a strong summer season, with occupancy rates reaching 66% during Q3 2023 vs. 52% in Q3 2022. While the overall 9M 23 occupancy rates reached 45% vs. 28% in 9M 2022. Foreigners represented c. 72% of our total occupancy in Taba Heights during 9M 2023 and 74% during Q3 2023.

Presentation:

The associated financial statements and presentation can be found under the IR section of Orascom Developments’ website under the following links:

https://www.orascomdh.com/investor-relations

Telephone conference today at 2:00 CET (Zurich Time):

Orascom Development invites you to its 9M 2023 results conference call on 16 November 2023: at 2:00 PM CET (Zurich Time). Chief Executive Officer, Omar El Hamamsy, Chief Financial Officer, Ashraf Nessim, and Director of Investor Relations, Ahmed Abou El Ella will present 9M 2023 results and will be available to answer questions. A registration is not required.

Dial-in details are as follows:

Click here for webinar link

Event number: 920 2049 1696

Event password:  043944

A call recording will be available after the call
 

Contact for Investors:      

Ahmed Abou El Ella     

Director of Investor Relations    

Tel: +20 224 61 89 61

mobile: +20 122129 5555      

Email: ir@orascomdh.com

About Orascom Development Holding AG:

Orascom Development Holding is a leading international developer specializing in vibrant, integrated communities in Europe, the Middle East, and North Africa. For more than 30 years, Orascom Development has been a pioneer in creating destinations where people are inspired to live, work, and play with passion and purpose.

From El Gouna’s stunning Egyptian coastal town by the Red Sea to Andermatt Swiss Alps’ breath-taking, year-round mountain destination, each master-planned community is a testament to Orascom Development's commitment to place-making at its finest. The integrated towns harmoniously combine residential areas with private villas and apartments, hotels, and award-winning leisure and commercial amenities – including golf courses, marinas, sports facilities, retail shops and restaurants.

Orascom Development owns a land bank of more than 100 million square meters with nearly 40% developed or under development into thriving communities in Egypt (El Gouna, Makadi Heights, O West, Taba Heights, and Byoum), in the GCC (The Cove in the UAE and Jebel Sifah and Hawana Salalah in Oman), and in Europe (Andermatt Swiss Alps in Switzerland, Luštica Bay in Montenegro and West Carclaze Garden Village in the UK). Orascom Development’s hospitality portfolio includes 33 premium and luxury hotels with more than 7,000 rooms across Europe, the Middle East, and North Africa. ODH shares are listed on the SIX Swiss Exchange.

For more information, please visit https://www.orascomdh.com/.

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