Annual Report - Orascom Development

4 | Letter to Shareholders | OHD Annual Report 2006
OHD’s success in 2006 drives our continued
commitment to our goals, building on and
developing our business strategy and moving
forward ensuring our growth and driving
shareholder value.
Dear Shareholders,
I am pleased to report that 2006 has been a tremendously
successful year for OHD. Our first annual report and accounts marks
a new stage in our growth, detailing a year of transformation and
signaling commitment to our goal of becoming a world leader. We
have proven ourselves as a well established Egyptian company and
are now demonstrating our capability as a fully-fledged international
player.
Performance
In 2006 we delivered an outstanding increase in profitability,
with gross operating profits up 37% to LE 496 million, combined
with an impressive revenue growth of 41% to LE 983 million
(2005: LE 683 million). This was driven by a significant contribution
from real estate sales and service-related revenue streams
complemented by our hotel business.
The real estate, construction and services businesses witnessed
exceptional growth in their contribution to the top line, increasing
from 45.9% in 2005 to 54.4% in 2006. Revenue from these sectors
increased from LE 314 million in 2005 to LE 524 million. The main
driver of this growth was real estate sales in Egypt. Total year end
sales reached LE 262 million, a growth of 55% (2005: LE 93 million).
Debt was extensively reduced during 2006 as we continued our
ongoing commitment to improving our capital structure. We cut
net debt by 35% to LE 392 million (2005: LE 603 million) and
reduced net debt to equity ratios for the year to 0.43x (2005:
0.71x), utilising the net proceeds from the capital increase.
Total asset value in 2006 increased by LE 844 million, registering
an impressive LE 3.7 billion and 29% year on year growth. As OHD
has never revalued any of its land banks or hotel properties
since its inception, the total reported asset figure in 2006 does not
accurately reflect the underlying market value. A key objective going
forward is to revalue assets to demonstrate our true value to the
market.
Another key development for OHD is the formidable but vital task
of issuing our consolidated financial statements for 2007 under
the International Financial Reporting Standards, in addition to those
required under Egyptian GAAP. We believe this further demonstrates
our commitment to our global vision and to cementing our credibility
in the international business arena.
Other related real estate revenue increased by an impressive LE
117 million reaching LE 263 million in 2006 – evidence of the
maturity reached in El Gouna and marking the start of positive
contributions from Taba Heights. Real estate and its services is
a key development area for OHD, and we place great emphasis
on its impact upon the bottom line.
The hotels sector remained a solid contributor and achieved a
healthy growth of 19% in revenues recording LE 439 million (2005:
LE 369 million). This improvement in revenue was mainly a result of
higher occupancy in El Gouna and greater operational efficiencies
throughout OHD properties. As we move forward with a greater
international prominence, we expect to be able to capitalise on
our increased presence and size in this sector to further improve
operational profitability.