Earnings Report /
Egypt

Orascom Development Egypt: 4Q19 – A great 2019 comes to a close

  • FY19 sales increased 202.5% y/y

  • Covid-19 impact is already apparent in 1Q20 numbers

  • We expect 2Q20 numbers to bear the brunt of the Covid-19 situation

Al Ahly Pharos Securities Brokerage
12 April 2020
Meets 2019 sales target with flying colors
  • Sales in 4Q19 reached EGP1.4 billion, up 154.8% y/y and up 4.0% q/q, bringing FY19 sales to EGP6.9 billion, up 202.5% from FY18 sales of EGP2.3 billion. Reaching the high end of the company’s FY19 sales target range of EGP6.5-7.0 billion, sales in FY19 were supported by the launch of O West which contributed 62.4% to FY19 sales.
  • Hotel revenue in 4Q19 was almost flat y/y and q/q and constituted 28.9% of total revenue. Total revenue in 4Q19 increased 37.3% y/y and 30.0% q/q to EGP1.3 billion due to the significant rise in real estate revenue.
  • Margins were higher q/q but lower y/y due to O West’s high upfront costs compared to its revenue that should grow over the coming years as construction progresses and the project matures.
  • Net profit increased 5.3% y/y and 89.6% q/q to EGP205.2 million.
  • Net debt decreased from EGP2.3 billion at the end of 3Q19 to EGP2.1 billion at the end of 4Q19. This net debt of EGP2.1 billion at the end of FY19 is also down from net debt of EGP2.9 billion at the end of FY18.
Covid-19 impact already apparent in 1Q20 numbers
Orascom Development Egypt (ORHD) also released 1Q20 performance indicators to provide some color on what is happening in light of the current covid-19 situation. The effect of covid-19 on 1Q20 numbers is more apparent in the company’s hospitality segment than it is in the company’s real estate segment given that 1Q20 real estate sales reached EGP1.5 billion, up 0.6% y/y and up 9.9% q/q, and hotels in El Gouna witnessed a decline in occupancy rate from 83.0% in 1Q19 to 64.0% in 1Q20. We expect 2Q20 numbers, in terms of both real estate and hospitality, to bear the brunt of the covid-19 situation.