FY 2012 Annual Report - Orascom Development

12 Orascom Development 2012 Annual Report 13
2.3 CFO’s Comment
Dear Shareholders,
Ahmed El Shamy
Chief Financial Officer
Operating cash flow improved in 2012, but
results were impacted by extraordinary items.
In 2013 we will continue to focus on cost
savings and monetization efforts.
Despite the on-going challenging market environment in the
MENA region and the subdued economic situation in Europe,
Orascom Development achieved to increase revenues by 7.1% to
CHF 271.9 million, up from CHF 253.8 million a year ago. The
growth in revenues was mainly a result of higher income from the
hotel and real estate segment. Gross profit for the period under
review improved from CHF 19.7 million (7.7% margin) to CHF 21.3
million (7.8% margin).
Extraordinary non cash items such as impairments or transaction
losses of CHF 45.1 million and provisions for cancelled real estate
sales and doubtful collections of CHF 27.3 million negatively impacted
the income statement. Accordingly, the operating result (EBITDA)
in 2012 was a negative CHF 52.1 million (2011: CHF 40.0 million
loss). When adjusting for the above mentioned extraordinary items
EBITDA in 2012 was CHF 20.3 million (7.5% margin) compared to
CHF 42.6 million in 2011 (16.8% margin).
While group taxes were virtually zero last year, in 2012 some CHF
10.1 million of taxes were charged against the income statement.
Combined with higher finance costs this resulted in a net loss after
minorities for the period of CHF 97.2 million versus a loss of CHF
69.7 million in 2011.
Reported versus adjusted EBITDA 2012 (in CHF million)
40
20
0
-20
-40
-60
-52.1
EBITDA
reported
+45.1
Extraordinary
items
+27.3
Real Estate
provisions
20.3
EBITDA
Adjusted
Balance sheet
Total assets on the balance sheet at the end of 2012 were largely
unchanged at CHF 2,082.6 million compared to one year ago. The
increase in property, plant and equipment (infrastructure, hotels and
land belonging to the Group) is mainly due to our development in
Switzerland (The Chedi) and Oman (Rotana). The decline in the
accounts receivables balance is due to an improved real estate
collection process in Egypt and the provision for doubtful debts.
Despite ongoing construction works, the inventory increased only
slightly. Cash and cash equivalents at the end of the reporting period
reached more than CHF 100 million.
Borrowings increased by CHF 67.7 million to CHF 603.9
million due to the use of credit facilities from the group’s majority
shareholder to finance our construction and development activities.
Net debt accordingly was CHF 502.2 million, compared to CHF
456.8 million a year ago. After having successfully rescheduled the
2013 and 2014 loan maturities, the group is in discussions with its
major creditors to further optimize the funding structure.
As a consequence of the reported net loss shareholders’ equity
including non-controlling interests decreased from CHF 1,095.2
million to CHF 977.9 million. The equity ratio declined from 52.6%
to 47.0%, respectively. The ratio of net debt to equity increased from
41.7% a year ago to 51.4%.
Operating cash flow improving
In 2012 Orascom Development generated an operating cash
flow (after interest and taxes) of negative CHF 14.5 million,
which was an improvement versus the same period last year.
During 2012 we invested CHF 104.1 million as we continued
to develop our destinations in Switzerland and Oman and as we
maintained the standard in our Egyptian destinations. For 2013,
we expect a capex of around CHF 60-70 million, excluding
discretionary capex, to finish the completion of the Rotana
hotel in Oman and for several other smaller projects in Egypt.
Further focus on cost savings and monetization programs
An important element for 2013 is the implementation of a more
capital-light strategy. This is a combination of divestments of nonstrategic
assets to strengthen the balance sheet or cooperation
with external partners in order to complete and finance entire
development phases or certain project elements.
Besides working on those monetization efforts, the Group has
developed several other strategies to ensure that appropriate and
immediate actions are taken during those unstable times and to
ensure sufficient funding for our 2013 plans, one of which is the
postponement of certain planned capital expenditure investments.
On an operational level, we are now focusing on liquidating our
inventory of finished or close to be finished real estate units as well
as initiating several efficiency and cost saving initiatives that should
generate savings in overhead expenses, direct expenses and
interest expenses.
We expect 2013 to be a tough year , yet we are firm believers that all
our efforts in monetization and efficiencies will pay out . We will keep
monitoring the events as they unfold at the present and will continue
revamping our operations to be more efficient so that they are in the
right structure once this cycle reverses.
Ahmed El Shamy
Chief Financial Officer