FY 2012 Annual Report - Orascom Development

16 Orascom Development 2012 Annual Report 17
3.2 Real Estate and Construction
The segment Real Estate and Construction achieved a high level of contracted sales in 2012, while the segment result was
affected by several extraordinary items.
Real Estate and Construction revenues
CHF 76.4m
(2011: CHF 67.0m)
2012
2011
Real Estate and Construction market in 2012
After several years of high inquiries for second homes in Egypt we witnessed
a lower demand from European buyers in 2012. In El Gouna for example
the share of local buyers accounted for about 80% in 2012 which is about
twice as high when compared to last years. We also saw an amount of real
estate owners returning their units, however we could retain customers by
shifting them towards lower priced units. In construction we completed the first
satellite campus of the Technische Universität Berlin in El Gouna and made
progress in our Makadi project on the Red Sea. Due to the subdued demand
for real estate in Egypt, the construction segment had to further reduce its
manpower capacities. In Oman we achieved the same level of real estate sales
as last year with two-thirds of our buyers being Omani citizens. Delectably
high was the demand in our European destinations such as Switzerland and
Montenegro with a regionally diversified buyer`s mix.
Financial review 2012
During 2012 Orascom Development sold 791 real estate units for the amount
of CHF 225.9 million compared to 898 units for the amount of CHF 131.5
million a year ago. The increase of 71.8% in terms of value was also a result
of our efforts to strengthen the on-site sales teams to create a more effective
international sales partner network. In terms of regional exposure the increase
mainly results from higher sales in Switzerland where we successfully sold 73
apartments in The Chedi Andermatt to Acuro and the fact that we started
sales in Montenegro.
For 2012 the segment Real Estate and Construction increased revenues
by 14.1% from CHF 67.0 million to CHF 76.4 million due to higher sales,
our efforts to accelerate construction works and deliveries and due to
the enhanced collection process. We as well increased the sale of extraworks
and upgrades for our sold units which positively affected revenues.
Throughout the year however, several extraordinary items impacted our
operating results. First, the increase in cost of goods sold particularly in
Oman affected segment results. Second, we built provisions in the amount
of CHF 27.3 million for cancelled real estate units and doubtful collections in
Oman and Egypt. Third, we had to reverse profits from the Iskan transaction
in Oman with an amount of CHF 7.4 million. The segment’s EBITDA of
negative CHF -11.1 million was a result of the aforementioned extraordinary
items. Adjusted for these extraordinary items, EBITDA in 2012 was CHF
23.6 million compared to CHF 27.6 million in 2011.
Outlook for 2013
During 2012, Stuart Siegel was appointed Chief Real Estate Officer. The main
focus for 2013 is to further develop a more flexible local sales strategy that
accommodates dynamic market cycles. In addition the real estate segment
focuses on expanding its sales distribution channels to reach new markets such
as Asia or the Gulf States. At the same time plans are set in place to ensure that
our products reflect current market needs by continuing to refine our pricing
and offering. Also, there will be more focus on offloading our existing inventory.
In Egypt, we will continue to develop programs that focus on incentives for
early settlement and will also provide financing programs as well as pay more
attention to the secondary resale and rental market. In terms of construction, we
will complete the hotel and residential units in Makadi including infrastructure
works as well as the Ancient Sands golf course including club house in El Gouna.
For Switzerland, we expect a positive impact from the development of the
destination’s infrastructure, the launch of the Chedi Hotel as well as from the
expansion and upgrade of the ski arena.
In Montenegro, construction for Luštica Bay will start with ten residential
buildings and we will develop an enhanced marketing strategy to raise the
value of Luštica Bay as a destination.
Real Estate prospects in Oman remain stable in 2013 while markets appear
to be slowly recovering. The finishing of sold properties continues and by the
middle of the year we expect to complete deliveries. Thereafter the focus will
be on selling inventory. No off-plan sales or new construction are planned
for this year, while we focus on further developing the Rotana hotel in Salalah
Beach for its completion in December.
Share of Group revenue
28.1%
(2011: 26.4%)
Adjusted EBITDA 1
CHF 23.6m
(2011: CHF 27.6m)
15.4
Value of
contracted
sales (CHFm) 2
163.9
19.4
14.2
1 Excluding provisions and Iskan profit elimination
2 Numbers excluding Haram City and Makadi
Egypt
Oman
Switzerland
Montenegro
2012
2011
2012
2011
The Real Estate Segment’s KPIs, as of 31 December 2012
3 3
Value of contracted units
(CHFm)
9
11
15
16
5 4
7
Contracted
89
Sales by Buyer
Nationality
(units) 2
Number of contracted
units
Value of reserved units
(CHFm)
Dutch
American
Belgian
French
Others
Number of reserved units
Country Destination FY 2011 FY 2012 FY 2011 FY 2012 2011 2012 2011 2012
Egypt El Gouna 24.8 19.4 47 61 10.2 9.3 18 24
Fayoum 1.5 - 12 - 0.1 - 1 -
Haram City 12.5 10.2 649 520 4.2 6.7 222 367
Makadi 3.9 2.3 96 54 0.4 0.1 9 5
UAE The Cove - 0.2 - 1 - - - -
Oman Jebel Sifah 7.4 10.5 15 15 0.4 - 1 -
Salalah Beach 5.9 3.7 20 8 0.2 - 1 -
Switzerland Andermatt 70.9 163.9 28 87 2.9 14.8 1 10
Montenegro Luštica Bay - 15.4 - 43 - 5.7 - 15
Morocco Chbika 4.5 0.2 31 2 1.6 1.7 15 11
Group Total 131.5 225.9 898 791 19.9 38.4 268 432
Group (excl. Budget Housing) 115.1 213.4 152 217 15.7 31.7 46 65
55
Swiss
Egyptian
Omani
British
Russian
Serbian