Orascom Development Holding AG: Enhanced operational performance across all destinations yet bottom line results were impacted by FX losses derived from its Egyptian largest subsidiary Orascom Hotels & Development (OHD) after the Central Bank of Egypt's (CBE) decision to float the Egyptian pound (EGP)

Tuesday, 11 April 2017

Orascom Development Holding AG: Enhanced operational performance across all destinations yet bottom line results were impacted by FX losses derived from its Egyptian largest subsidiary Orascom Hotels & Development (OHD) after the Central Bank of Egypt's (CBE) decision to float the Egyptian pound (EGP)

Orascom Development Holding AG / Key word(s): Final Results/Final Results

11-Apr-2017 / 07:00 CET/CEST
Release of an ad hoc announcement pursuant to Art. 53 KR

Revenues reached CHF 237.4 million vs. CHF 306.1 million in FY 2015 Significant increase in Oman and UAE's hotels performance A 101% increase in net real estate sales to reach CHF 115.2 million vs. CHF 57.3 million in FY 2015 Non-cash loss of CHF 146.1 million impacting the Group's P&L post Central Bank of Egypt's decision to float the Egyptian pound
 Altdorf, 11 April 2017 - During 2016, Orascom Development Holding (ODH) was challenged by several periods of volatility and turbulences.  Results were further impacted by the political and economic backdrop in Egypt especially after the CBE's decision to float the EGP. Nonetheless, the Group was able to enhance operational performance across all its destinations, especially in Oman and Montenegro. In line with the strategic decision of being selective with land sales moving forward, the Group did not pursue any land sales in 2016. Total revenues of the Group reached CHF 237.4 million vs. CHF 306.1 million in FY 2015, which included CHF 65.2 million of land sales revenue.
 
The decision taken by the CBE in November 2016 to float the Egyptian pound in an attempt to stabilize the economy has had a significant impact on a lot of companies that operate in Egypt including the Group. The 102.7% appreciation of the U.S. Dollar against the EGP from 8.88 to 18.0 resulted in substantial revaluations of the debt held in US Dollars at the subsidiary and subsequently negatively impacted the Groups P&L statement with a non-cash foreign exchange loss of CHF 113.2 million.  On the other hand, total debt of the Egyptian subsidiary on ODH's balance sheet decreased by 24% from CHF 414.7 million to CHF 315.2 million. It is important to note that the Group's hotels and real estate income is mostly in foreign currency and therefore ODH borrows also in USD and benefits from a lower interest rate. Results were further impacted by impairments in the amount of CHF 32.9 million. Gross profit reached CHF 11.3 million and the net loss attributable to shareholders for the reporting period amounted to CHF 196.4 million vs. a net loss of CHF 19.1 million in FY 2015.
 
On the positive side, Adjusted EBITDA for the period reached CHF 19.6 million. When results are normalized for land sales in the comparative period the Adjusted EBITDA would have reached only CHF 15.6 million in FY 2015.
 
New destination based structure
 
Throughout the first half of 2016, important positions within the organization have been changed and filled on the executive and top management level.  After a strategic review, it was decided that the Company's medium to long term strategy will be streamlined in three areas: 1) Establishment of enhanced business practices, 2) Strengthening of ODH's balance sheet, and 3) Repositioning and enhancement of ODH's brand.
 
ODH started working on re-organizing the current segment structure to a destination based structure. Each destination will become a separately managed entity headed by its own CEO or General Manager, giving more authority and responsibility to a destination with the goal of increased operational efficiency and shorter decision-making processes. The model is already implemented in Fayoum and Taba.  
 
ODH will continue to capitalize on the core asset of the Group; its land bank and the value that it pertains through the following approaches; its own developments, sub-development of certain projects that will add value to the destination and also by providing the market with an independent fair value of the undeveloped land bank by an external valuator.
 
The Group is also divesting some of its non-core assets and using the proceeds to further reduce its outstanding debt. In parallel, ODH is examining the revaluation of some of the mature assets that have been booked at cost so far and thus are not representing their higher market values.

Gulf hotels are on the rise and hotels in El Gouna continue to be the best in the market
 
The Gulf hotels in Oman and UAE witnessed a notable boost in their performance recording a 57.5% increase in GOP growing from CHF 12.7 million to CHF 20.0 million in FY 2016. Their contribution to the total segment revenues continued to increase to reach CHF 59.3 million out of a total segment revenue of CHF 120.2 million. Demand on our hotels in Salalah, Oman continued to be acknowledged also in the latest ITB Berlin conference. We added 84 new rooms in Al Fanar hotel during December 2016 bringing the total room count to 302.  The Salalah destination has been recently branded to "Hawana Salalah" and its hotels alone recorded a 28% increase in occupancies growing from 54% to 69% and a 166.7% increase in GOP. Similarly, in UAE, The Cove Rotana continued its positive momentum with an increase in occupancy rate to reach 78% in FY 2016 vs. 70% in FY 2015.
 
In Egypt, the severe decline in the country's tourism sector continued to affect the segment's performance.  Tourist arrivals fell by 41.9% in FY 2016 compared to same period last year. El Gouna, Egypt however, with its strong positioning and strong ties with leading European tour operators, continued to be the best performer on the market and recorded a 15.4% GOP growth from FY 2015.
 
Demand started to pick up in Taba Heights, Egypt despite of the extended travel bans on Sinai, due to aggressive marketing campaigns implemented in Jordan and on the local Egyptian markets. In January 2017, 100 rooms in the El Wekala Golf Resorts out of the hotels existing 215 rooms were reopened. To date, we have a total of 818 operating rooms in Taba Heights out of 2,365 rooms compared to only 442 rooms operating in 2015. We are also planning to open more rooms in the coming months.   
 
A 3-year lease agreement with FTI Group for 3 of the Group's hotels in Makadi for a total of EUR 3.3 million was signed. In Fayoum, the Byoum Lakeside Hotel was successfully opened in September 2016 with 50 rooms recording an occupancy of 43% during FY 2016.
 
Overall, total hotel segment revenues decreased by only 3.2% to reach CHF 120.2 million in FY 2016 vs. to CHF 124.2 million in FY 2015 while the Adjusted EBITDA recorded a 12.2% increase from CHF 18.1 million in FY 2015 to CHF 20.3 million in FY 2016.
 
Net contracted sales increased by 101% to CHF 115.2 million with more contributions coming from El Gouna, Sifah and Luštica Bay

The real estate sales target for the year was exceeded with total net sales value reaching CHF 115.2 million vs. CHF 57.3 million in 2015. El Gouna remained the Group's most important sales contributor recording a net sales value of CHF 80.6 million in FY 2016 vs. CHF 61.1 million in FY 2015 on the back of targeted sales and marketing activities.
 
In Jebel Sifah, Oman, a new real estate project called "Golf Lake Residence" was launched in November 2016 with a total inventory of CHF 19.3 million and comprising 118 apartments overlooking the golf course.  ODH managed to sell more than 80% of the total project by February 2017. Total net sales in Oman reached CHF 16.2 million in FY 2016.
 
Interest in Luštica Bay, Montenegro has continued to flourish. Net sales reached CHF 17.3 million in FY 2016 compared to CHF 9.1 million in FY 2015. The Group is progressing with the construction of the new buildings comprising 88 apartments with plans to be delivered during the first half of 2017. Further, the marina superstructure was finalized.
 
Total real estate revenues reached CHF 65.4 million in FY 2016 vs. CHF 66.4 million in FY 2015. Total deferred revenue from real estate that is yet to be recognized until 2019 reached CHF 133.3 million in FY 2016 compared to CHF 143.0 million in FY 2015.
 
Outlook for FY 2017
 
Real Estate
 
In El Gouna, ODH is building on the strong base and momentum of last year's offerings and plans to launch new phases of Tawila and Fanadir Bay with an expected inventory of USD 40.0 million. In Fayoum, new products with a total inventory of CHF 3.4 million in Q2 2017 will be launched. In Oman, two new launches in Sifah and Hawana Salalah are planned and we will continue with the construction of the water park project in Hawana Salalah.
 
Hotels
 
In El Gouna, some renovation works across the hotels are planned to further upgrade the destination's positioning. With demand recently picking up in Taba Heights, opening additional rooms is being considered. In Montenegro, construction of the 5-star Chedi Hotel in Luštica Bay is expected to start during the first half of 2017, with plans to be opened in July 2018.  In UAE, we finalized the construction of The Cove Rotana extension, adding 145 rooms to open during 2017.
 
Corporate
 
The Group will continue with the implementation of the new destination based structure and put emphasis on further efficiency improvements.  

Presentation
The associated financial statements and presentation can be found on Orascom Developments' website https://www.orascomdh.com/en/investor-relations/financial-reports.html under the Investor Relations section. 
Telephone conference today at 4:00 pm CET/CLT (Zurich and Cairo Time)
Orascom Development invites you to its FY 2016 results conference call on 11 April 2017 at 4:00 pm CET/CLT (Zurich and Cairo Time). The call will include an address from the Chairman Samih Sawiris, a presentation from the CEO Khaled Bichara and the CFO Ashraf Nessim, followed by a Q&A session.  A registration is not required. Conference password: 94028741 International: +44 (0) 1452 555 566 Switzerland Toll Free: 0800 828 006 Switzerland Local Number: 0315 800 059 Egypt Toll Free: 0800 000 0318 UK Toll Free: 0800 694 0257 US Toll Free: 1866 966 9439 
A replay of the conference call will be available for two weeks with the following dial in details: Access Code: # 94028741 International: +44 (0) 1452 55 00 00 UK National: 08717000145 US Toll Free: 1866 247 4222 Available until 25 April 2017
About Orascom Development Holding AG

Orascom Development 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. Orascom Development's diversified portfolio of destinations is spread over seven jurisdictions (Egypt, UAE, Oman, Switzerland, Morocco, Montenegro and United Kingdom), with primary focus on touristic destinations. The Group currently operates ten destinations; five in Egypt (El Gouna, Taba Heights, Fayoum Makadi, and Harram City), The Cove in the United Arab Emirates, Jebel Sifah and Hawana Salalah in Oman, Luštica Bay in Montenegro and Andermatt in Switzerland. Orascom Development has a dual listing, with a primary listing on the SIX Swiss Exchange and a secondary listing on the EGX Egyptian Exchange.
 
Contact for Investors: 
Sara El Gawahergy                                                             
Head of Investor Relations                                                                               
Tel: +20 224 61 89 61
Tel: +41 418 74 17 11                                                                                        
Email: ir@orascomdh.com

Contact for Media Relations:
Philippe Blangey
Partner
Dynamics Group AG
Tel: +41 432 68 32 35
Email: prb@dynamicsgroup.ch
 
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End of ad hoc announcement