Orascom Development Holding AG: has released its consolidated financial results for Q2 2024

Ad hoc announcement pursuant to Art. 53 LR.

Orascom Development Holding (“ODH”) (SIX ODHN.SW) has released its consolidated financial results for Q2 2024.

Strong growth and strategy execution, demonstrating solid operational and financial performance amidst a challenging business environment, led to a net profit of CHF 10.9 million in Q2 2024, up by 53.5%.

Key Highlights of Q2 2024:

• Total revenues went up by 24.7% to CHF 160.9 million.
• Adj. EBITDA up by 69.4% to CHF 55.9 million, with a 34.7% margin vs. 25.6% in Q2 2023.
• Net profit went up by 53.5% to CHF 10.9 million.

Key Highlights of 1H 2024:

• Total revenues went up by 20.7% to CHF 306.4 million.
• Adj. EBITDA up by 44.2% to CHF 98.5 million, with a 32.1% margin.
• Adjusted net profit of CHF 41.9 million, up 35.6% vs. 1H 2023.
• Real estate operational figures remained strong, with real estate sales up by 59% to CHF 433 million.
• Revenues from recurring business increased by 10.0% to CHF 109.9 million.
• Completed two monetization deals during 2024 for CHF 67 million in UAE and El Gouna.  
• Cash flow from operations reached CHF 88.4 million.

Altdorf, 14 August 2024 – During 1H 2024, ODH demonstrated robust operational and financial performance, navigating a challenging landscape marked by the ongoing conflict in Gaza, geopolitical tensions in the Middle East, and economic instability. Our results reflect effective management in a complex macroeconomic environment. Despite incurring a non-cash foreign exchange loss of CHF 45 million, ODH's commitment to enhancing operational efficiencies remains unwavering. Our diverse business strategy has proven resilient against inflationary pressures, bolstered by innovation and operational effectiveness. This approach has translated into significant revenue growth and improved Adj. EBITDA and expanding margins. Building on our established strategy, we successfully advanced our monetization plan initiated two years ago, completing two significant deals for c. CHF 67 million to date. Looking ahead, our focus for the remainder of the year is to accelerate profit growth while fostering a more flexible and cost-efficient business model, ultimately creating more excellent value for our shareholders, clients, and partners.

Key Financial Highlights for Q2 2024:

ODH reported prosperous first-half results, showcasing significant growth despite facing challenges from foreign currency translation losses related to our Egyptian subsidiary. The devaluation of the Egyptian Pound (EGP) impacted our financial results. Yet, we have effectively navigated these challenges to deliver strong performance in other areas.

• Total revenue: up by 24.7% to CHF 160.9 million, driven by a robust increase in real estate, land sale activities and the enhanced business performance of our recurring income segments.
• Gross profit: Gross profit increased by 57.5% to reach CHF 57.8 million and a margin of 35.9%, compared to 28.4% in Q2 2023. This growth occurred despite rising material costs due to the prevailing inflationary environment.
• Adj. EBITDA and EBITDA improvement: Our adjusted EBITDA grew by 69.4% to CHF 55.9 million, yielding a robust margin of 34.7%. Despite reporting a loss of CHF 6.9 million from our associates, primarily due to ASA's decreased performance, our overall EBITDA increased by 44.3% to CHF 44.6 million.
• Strong bottom-line performance: Our adjusted net income, excluding all other gains and losses, increased by 180.4% compared to 1H 2023, reaching CHF 15.7 million. However, the overall bottom-line performance reported a profit of CHF 10.9 million, a growth of 53.5% from CHF 7.1 million in Q2 2023.

Key Financial Highlights for 1H 2024: 

• Robust revenue growth: Revenues increased by 20.7% to CHF 306.4 million.
• Gross profit: up by 31.9% to CHF 102.5 million, with a margin of 33.5%, vs. 30.6% in 1H 2023.
• Real estate revenues: reached CHF 167.0 million, marking a solid 8.5% increase relative to 1H 2023.
• Land revenues: reached CHF 29.5 million, mainly from a landmark sale in El Gouna.
• Recurring income segments: demonstrated strong performance, with revenues climbing 10.0% to CHF 109.9 million.
• Significant Adj. EBITDA improvement: up by 44.2% to CHF 98.5 million, with a margin of 32.1% vs. 26.9%, underscoring our commitment to operational excellence.
• Finance costs: increased by 34.5% to CHF 30.0 million, primarily due to the rise in interest rates, which will be monitored closely moving forward.
• Strong adjusted net income performance: ODH reported an adjusted net income of CHF 42.2 million, representing a 36.6% increase compared to CHF 30.9 million in 1H 2023. This figure excludes all other gains and losses, including foreign exchange fluctuations and non-operational one-off transactions.
• Cash from operations: significantly increased to CHF 88.4 million during 1H 2024, driven by improved operational performance across all business segments. This robust growth underscores our commitment to operational excellence.

However, when accounting for these one-off items, ODH experienced a net loss of CHF 24.8 million, compared to a net profit of CHF 17.7 million reported in 1H 2023. The primary factors contributing to this loss included:

• Foreign exchange translation losses: One-off foreign exchange losses amounted to CHF 45.0 million, primarily driven by the devaluation of the EGP against other currencies.
• Other losses: In 2024, the company incurred losses of CHF 10.5 million related to the sale of the RAK hotel.
• Share of losses from associates: We recognized a loss of CHF 8.8 million from ASA, the Group’s largest associate.

It is important to note that these losses are accounted as non-cash items and do not adversely impact the company’s cash flows, reflecting our ongoing commitment to operational efficiency and financial stability. Overall, ODH's performance in the first half of 2024 reflects our strategic initiatives and operational efficiencies, positioning us well for future growth. We remain dedicated to overcoming challenges and capitalizing on opportunities as we move forward.

Group Real Estate: Our real estate operational figures remained strong despite the challenges posed by the devaluation of the EGP, with real estate sales up by 59% to CHF 433 million

In the second quarter of 2024, ODH achieved new real estate sales worth CHF 176.3 million, which brought sales value for 1H 2024 to CHF 433.0 million, up by an impressive 59.2% compared to the same period last year. We have effectively navigated the market fluctuations to maintain our performance and uphold our commitment to excellence. The increase in sales across all destinations was accomplished by an increase in average selling prices and the number of units sold, which rose by 18.6% to 1,102 units vs. 1H 2023. The combined growth in sales and construction pace has bolstered our real estate revenue by 8.5% to CHF 167.0 million in 1H 2024—meanwhile, Adj. EBITDA increased by 1.9% to CHF 57.8 million in 1H 2024, with a margin of 34.6%, reaffirming our commitment to operational excellence. Furthermore, the total deferred revenue from real estate that will not be recognized until 2027 has increased by 12.0% to CHF 743.0 million, providing strong visibility on our real estate revenue across all our destinations over the next 3-4 years.

Group Hotels: Amid persistent challenges in the Middle East, we showcased unwavering strength and resilience, leading to an 8% increase in revenues, reaching CHF 73 million and a 35% Adj. EBITDA margin

ODE Hotels' well-established business model once again delivered exceptional quarterly results despite facing various macro and geopolitical challenges worldwide. Our hotels achieved revenues of CHF 34.5 million, marking a 2.4% increase over Q2 2023. The ability of our hotels to maintain high occupancy rates and enhance room rates has been instrumental in fueling this growth. We have managed to sustain a healthy margin and achieve robust financial outcomes. In 1H 2024, total hotel revenues increased by 7.6% to CHF 73.4 million, with GOP of CHF 27.1 million—moreover, Adj. EBITDA increased by 12.9% to CHF 25.3 million in 1H 2024, with an improved margin of 34.5% compared to 32.8%, driven by ongoing enhancements in operational efficiencies. This robust financial performance underscores our hotel’s resilience and adeptness at navigating a challenging market environment.

Recurring income commercial assets: Strong growth, with revenues up by 15.1% to CHF 36.5 million

The commercial assets segment serves as a reliable source of cash flow, critically supporting the group against unforeseen events. In Q2 2024, revenue reached CHF 17.3 million. These results propel our commercial assets segment revenue to CHF 36.5 million, representing a 15.1% increase over 1H 2023—additionally, Adj. EBITDA grew ahead of revenue, signaling our operational excellence. Adj. EBITDA experienced a 55.0% increase to CHF 6.2 million, resulting in a margin of 17.0%, a significant improvement from 12.6% in 1H 2023.

Details on Destinations

El Gouna, Red Sea:

New real estate sales during Q2 2024 increased by 34.9% to CHF 69.2 million. That brings our 1H 2024 real estate sales to CHF 173.8 million, a remarkable increase of 101.6% from CHF 86.2 million in 1H 2023. The increase in sales was also accomplished by a 40.2% uptick in units sold to reach 185 units. Our average selling prices soared by 72.5% to CHF 6,191/sqm vs. Q2 2023, while 1H 2024 average selling prices increased by 24.0% to CHF 4,593/sqm. In EGP, net sales grew by 172.1% to EGP 7.8 billion, while average selling prices were up by 67.3% to EGP 207,079/sqm in 1H 2024. Meanwhile, on the construction side, we are progressing rapidly with our construction activities, with plans to deliver 384 units this year, of which 96 units were already delivered to clients. Real estate revenues during 1H 2024 reached CHF 63.6 million. On the other hand, we completed a landmark land sale in El Gouna for CHF 29 million. This successful transaction is part of ODE's strategic initiative to enhance value creation through selective land sales aimed at accelerating the monetization of its land bank.

In the hospitality segment, in Q2 2024, El Gouna Hotel’s revenues experienced a substantial rise of 11.9% to CHF 23.5 million compared to Q2 2023. During the same period, hotel occupancy levels maintained the same levels reported in Q2 2023 at 73%, up from Q1 2024 rates. Furthermore, the Average Room Rates (ARRs) increased by 11.5%, reaching CHF 97 per night. Progressing into 1H 2024, the hotel revenue continued its upward trajectory, growing by 11.7% to CHF 41.9 million. The occupancy rate for 1H 2024 stood at 68%, with ARRs climbing by 11.1% to CHF 90 per night. Meanwhile, the GOP reached CHF 20.9 million. In Q2 2024, foreigners constituted 81% of the total hotel occupancy, which increased to 84% for 1H 2024. A 10-year lease agreement was secured for the Dawar El Omda hotel (66 rooms) for USD 0.51 million, with an annual escalation of 2.75%. In terms of commercial assets, a remarkable 22.4% increase in revenue was achieved, reaching CHF 27.8 million. El Gouna's total revenues experienced a solid uptick of 20.5%, reaching CHF 162.8 million compared to 1H 2023's figures, while in local currency, total revenues were up by 62.8% to EGP 7.2 billion.

O West, Egypt:

Net real estate sales notably increased by 16.7% to CHF 124.2 million compared to 1H 2023. Our average selling prices also demonstrated a 21.4% increase to CHF 1,908/sqm vs. 1H 2023. In EGP, O West has achieved an impressive 57.6% increase in net real estate sales, reaching EGP 5.6 billion, with average selling prices up 63.8% to EGP 86,008/sqm. On the development side, we are speeding up our construction pace, and we successfully delivered 316 villas to homeowners during 1H 2024. With plans to hand over another 684 units in 2024. Construction of the O West Club is progressing steadily, with plans to become partially operational before the end of 2024; the club has more than 4,500 members, providing a steady recurring income stream. O West's total revenues increased by 41.5% to CHF 53.2 million, reflecting the company's continued growth and leading position in the local market. In EGP, the total revenues of O West have increased by 90.8% compared to 1H 2023.

Luštica Bay, Montenegro:

Luštica Bay achieved exceptional sales figures in Q2 2024, generating CHF 32.0 million, representing a substantial 125.4% increase compared to Q2 23.  This impressive performance contributed CHF 43.3 million in real estate sales for 1H 2024, marking an 86.6% surge vs. 1H 2023. We sold 69 units, an increase of 53.3% vs. 1H 2023. Our real estate average selling price reached CHF 7,212/sqm, up 18.2% from 1H 2023. Total real estate revenues increased by 15.6% to CHF 11.1 million. The Chedi Hotel, a summer-only destination, has performed well, signaling a strong summer season. The hotel reported CHF 2.8 million in revenue and a 34% occupancy rate. The total revenues from Luštica Bay have maintained the same levels as reported last year, standing at CHF 16.0 million.

Hawana Salalah and Jebal Sifah, Oman:

Hawana Salalah destination has maintained a positive trend since last year. In 1H 2024, real estate sales continued their upward trend, reaching CHF 23.7 million, an 88.1% increase vs 1H 2023. This growth was accompanied by a 60.5% increase in unit sales, with 61 units sold during, while our real estate average selling prices also increased by 22.2% to CHF 2,908/sqm. On the development side, 69 of the 115 units planned for the year have been handed over to their owners. The hotels in Salalah maintained their positive performance despite being affected by the seasonality. Occupancy rates increased by 3ppts to 65%. Total revenues from Hawana Salalah hotels increased by 26.8% to CHF 26.0 million. Total revenues from Hawana Salalah increased by 16.7% to CHF 35.7 million, owing to the demand for the hospitality industry in Salalah.

Our second destination in Oman, Jebal Sifah, real estate sales experienced a positive uptick during 1H 2024, with a 53.5% increase from CHF 8.6 million in 1H 2023 to CHF 13.2 million 1H 2024. Our average selling prices during 1H 2024 reached CHF 2,777/sqm, and the number of contracted units increased by 150.0% compared to 1H 2023, reaching 45 units sold. Total revenue for Jebel Sifah increased by 7.6% to reach CHF 15.6 million in 1H 2024.

Makadi Heights, Egypt:

The destination continued to achieve pleasing sales results. Net sales increased by 56.0% to CHF 49 million in 1H 2024. At the same time, our average selling prices increased by 14.2% to CHF 1,502/sqm. Additionally, the number of units sold increased by 43.1%, with 292 units sold in 1H 2024, while real estate revenues increased by 40.4% to CHF 9.9 million in 1H 2024, thanks to the accelerated construction pace. In EGP currency, net sales increased by 71.4% to reach EGP 2.2 billion, while average selling was up by 54.1% to EGP 67,711/sqm vs. 1H 23. On the other hand, Makadi Heights has accepted the Tourism Development Authority’s request for an additional land payment of USD 5.6 million over a ten-year instalment in return for a new development timeline of 8 years for Makadi Heights' remaining land bank. Total revenues from Makadi Heights were up by 36.5%, recording CHF 10.9 million. However, in EGP, revenues were up by 84.2% compared to 1H 2023.

The Cove, UAE:

The Group entered into a binding share purchase agreement with Cove Holdings Limited to sell RAK's entire share capital. The transaction’s total Enterprise Value is USD 40 million. ODH and the other shareholders of RAK will receive approximately USD 23 million in cash proceeds from their entire equity stake in RAK. Additionally, the Buyer is assuming c. USD 18 million of RAK’s debt, thus reducing ODH’s overall debt. The transaction is expected to close in Q3 2024, subject to the satisfaction of certain closing conditions. Total revenues for 1H 2024 were almost stable at CHF 11.8 million compared to 1H 2023, while occupancy rates decreased by 5ppt to 74% vs. 79% in 1H 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 1H 2024 results conference call on 14 August 2024 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 1H 2024 results and will be available to answer questions. Registration is not required.

Dial-in details are as follows:

Click here for the webinar link

Event number: 938 6192 3041

Event password:  918804

A call recording will be available after the call

Contact for Investors:      

Ahmed Abou El Ella     

Group 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 (ODH) is a leading developer of fully integrated towns, including hotels, private villas, apartments, leisure facilities such as golf courses, marinas, and supporting infrastructure. Orascom Development Holding’s diversified portfolio is spread over seven jurisdictions (Egypt, UAE, Oman, Switzerland, Morocco, Montenegro, and the United Kingdom). The group currently operates ten destinations: five in Egypt (El Gouna, Taba Heights, Makadi Heights, O-West, and Byoum), The Cove in the United Arab Emirates, Jebel Sifah and Hawana Salalah in Oman, Luštica Bay in Montenegro, and West Carclaze Garden Village in the United Kingdom. The shares of ODH are listed on the SIX Swiss Exchange.

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

Disclaimer & Cautionary Statement:

This press release may contain forward-looking statements based on current assumptions and forecasts of ODH management. Known and unknown risks, uncertainties, and other factors could lead to material differences between any forward-looking statements made here and the actual development, particularly ODH's results, financial situation, and performance. ODH accepts no responsibility for updating or adapting forward-looking statements to future events or developments.