FY 2012 Annual Report - Orascom Development

F-89 Orascom Development 2012 Annual Report F-90
Notes to the financial statements
1 GENERAL
The purpose of the Company is the direct or indirect acquisition, durable management and disposal of participations in domestic
or foreign enterprises, in particular in the field of real estate, tourism, hotels, construction, resort management, financing of real
estate and related industries as well as the provision of related services.
2 PLEDGED ASSETS TO SECURE OWN OBLIGATIONS
The Swiss subsidiary Andermatt Swiss Alps AG (ASA) has obligations towards the canton of Uri and the municipality of
Andermatt. ASA is responsible for the construction of certain parts of the tourism resort Andermatt. Within certain periods of time
or should the construction work be stopped for whatever reason, ASA has the obligation to rebuild the relevant plots of land to the
original state. As at 31 December 2012, 36,985 ASA shares (2011; 32,347) with a nominal value of CHF 1,000 each, amounting to a
total book value of CHF 36,985,000 (2011: CHF 32,347,000), have been pledged as a security to the canton and municipality.
Additionally, land with a value of CHF 1,000,000 has been pledged (31 December 2011: CHF 1,000,000).
3 OFF-BALANCE-SHEET LEASING COMMITMENTS
CHF 2012 2011
Cars - 26,012
Office rent 4,422,600 4,633,200
4 INCORPORATION COSTS
Incorporation costs relate to costs incurred in relation to the incorporation of the Company, the related capital increase and
exchange offer, as well as the listing of the shares at the SIX Swiss Exchange and the EGX Egyptian Exchange in 2008 and the
public offering in relation to the capital increase in September 2010. Incorporation costs are capitalised and amortised over a
period of five years.
5 FIRE INSURANCE VALUE OF FIXED ASSETS
The fire insurance value of fixed assets at 31 December 2012 amounts to CHF 731,000 (31 December 2011: CHF 731,000).
6 LIABILITIES TOWARDS STAFF PENSION SCHEMES
Current liabilities at 31 December 2012 amount to CHF 7,777 (31 December 2011: CHF 63,683).
7 OTHER PAYABLES – SHAREHOLDER
As in prior year the position of “other payables – shareholder” at 31 December 2012 includes CHF 5,013,504 (2011: CHF 4,925,982
due to the Egyptian counterparty “Misr for Central Clearing, Depository and Registry” (MCDR), which will pay out the amount of
CHF 0.65 per share to the shareholders with shares which are registered and traded on the Egyptian Stock Exchange (EGX). The
difference between the value of 2011 and 2012 is accrued interest with an amount of CHF 87,522.
The amount of CHF 68,114,407 due to Mr. Samih Sawiris (31 December 2011: CHF 10,331,389) is also included within this position.
8 INVESTMENTS
Investments are valued at acquisition cost less adjustments for impairment, if any. On a regular basis the Company’s management
reviews the recoverable value of the Company’s investments in the various destinations, and accordingly amends the carrying
value with impairment losses if there are any.
The Egyptian revolution in 2011 has negatively affected the performance of the Company’s Egyptian arm under Orascom Hotels &
Development S.A.E. (“OHD”). OHD’s different operating segments, especially the real estate and hotels being the key revenue
and value drivers of OHD, have been negatively affected by the deteriorated economic conditions that took place in Egypt. This is
represented in downsized demand on real estate purchases and declined flow of tourists. During 2012 the performance of OHD’s
different segments started to recover partially and perform in a better manner than 2011. However, the recovery was not as
comprehensive and quick as anticipated in prior year. There still remains uncertainty and the foreseen performance over the
coming five years does not indicate a full recovery.
The valuation model of the Company captures the different investments, whether greenfield projects, brownfield projects, or
operating projects. The valuation model adopts various approaches depending on the category of the project, as for the greenfield
projects and brownfield projects, the model keeps it at investment cost given the uncertainty of the future assumptions and the
absence of track record for those projects. One of the major contributors to the investments’ value are land banks in Egypt. Its
value depends very much on developments and sales that are achievable over a long-term period. Due to this long-term view and
the current political and economic situation there remains a significant uncertainty.
For the operating projects, DCF valuation techniques have been applied in addition to net asset value techniques for the hotels
segment. Major underlying assumptions are occupancy and average room rates for hotels and the number of real estate units to
be sold. The various assumptions and future projections incorporate the various political, economic and operational facts
prevailing at the time of preparing the valuations. Future developments may impact the value.
The valuation model of Egypt resulted in an enterprise value for OHD of CHF 1,143 million against the carrying amount of CHF
2,141 million which resulted in an impairment loss of CHF 998 million. The Company’s management considers the carrying amount
of OHD after this impairment as fairly stated and reflecting its realizable value as at December 31, 2012. However, there remains a
significant uncertainty as to the assumptions used in the valuation.
At 31 December 2012, the Company directly holds the following investments:
Company, domicile, purpose Ownership % Share capital
31 December
2012
31 December
2011
Orascom Hotels & Development S.A.E. 99.68% 99.68% EGP 1,109,811,630
(previously: EL Gouna Development & Hotels S.A.E.), Egypt
Real estate development, hotel management
Arena for Hotels Company S.A.E., Egypt 99.85% 99.85% EGP 20,000,000
Hotel operation
Orascom Development Holding International Ltd, British
Virgin Islands (BVI) - 100.00% USD 1
International holding company
Orascom Development & Management Limited, Cyprus 100.00% 100.00% EUR 1,000
Management company
ORH Investment Holding Ltd, BVI 100.00% 100.00% USD 125,000,000
International holding company
ONSA Holding Ltd, BVI - 100.00% USD 1
International holding company
Lustica Development AD, Montenegro 51.00% 51.00% EUR 25,000
Real estate development, hotel management
Andermatt Swiss Alps AG, Switzerland (ASA) 100.00% 100.00% CHF 42,000,000
Real estate development
Orascom Development International AG, Switzerland 100.00% 100.00% CHF 100,000
Real estate development
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