Orascom Development Egypt S.A.E. (ORHD) Earnings Call Transcript & Summary

Hello, good morning, and thank you for dialing in. This is Marlene Milad from CI Capital Research team. We're happy to be hosting today ODE's 4Q '25 Results Conference Call. From management, we have with us: Mohamed Fouad, CFO; and Ahmed Abou Ella, Head of IR. As usual, we will start off with the presentation by management, and then we'll open the floor for questions. I will now hand over the call to management for the presentation.

Thank you, Marlene. Hello, everyone. Good afternoon, and thank you for joining us and presenting Orascom Development Egypt close of 2025 financials. Actually, by closing of 2025, Orascom Development presented good financial results for the whole year, although it was a challenging year and despite of the challenging macro and geopolitical environment that we have experienced during 2025. In a nutshell, if we see Orascom Development closed the year almost at EGP 25 billion in top line revenue; EGP 10 billion and cash position, almost EBITDA of around EGP 10 billion, EGP 5.4 billion for the net profit of the year and very strong cash from operation of almost EGP 8.5 billion. On a sectorial basis, the real estate, as always, is presenting the largest share of our top line revenue with almost 53%, presenting EGP 13.3 billion. Hospitality and Commercial assets representing the rest of -- by achieving throughout the year, almost EGP 5.8 billion for the hospitality business, commercial assets of EGP 4.3 billion (sic) [ 4.4 billion. ] If we go into a year-on-year, we can see moving from 2024 to 2025, almost 15% growth, reaching the same EGP 25 billion on top line. On the EBITDA, achieving almost EGP 10 billion coming from EGP 9.3 billion in 2024 and a very solid net profit closing for the year with almost EGP 5.3 billion, achieving 56% and very strong as well quarter-on-quarter '24 to '25 percentage of growth. On the real estate sales and as we briefed before during previous quarter's calls that we had experienced a decline in overall sales compared to '24, where that was first year for the real estate market itself. In '25, we actually had intentional direction of ensuring that we are managing well our inventory of introducing the right products to the market not to be dragged into the longer payment plans, the price war that used to be in the market with very specific sales pipeline and launches during the year. However, and despite of that, we have increased on almost all the KPIs related to real estate sector. For example, if we -- if we're looking into our deferred revenue balance, it had grown with almost 17% between '24 and '25, the real estate receivables, of course, and the real estate cash collection increased by almost 16%, and the most important KPIs related to the average selling pricing that we're looking after all the way at Orascom Development, we have increased across the 3 destinations that are in our focus were: Gouna increase was almost 30% on a year-on-year basis; Makadi increase was almost 57%; and O West, 11%. Our main focus as well was around the international sales that kept on the range of 40% to 45% across our all 3 destinations, whereby on certain destinations like Makadi, it presented almost 60% out of total sales that is being sold internationally. On our delivery as well, we have a very strong delivery record for '25 with almost near 1,000 units across all destinations. For the Real Estate segment on specific, the year-on-year growth in top line was almost 3%. The quarter-on-quarter has a very strong growth was almost 25% and adjusted EBITDA as well showed almost 51% growth on a yearly basis. Our focus always for the real estate sector is directed to ensuring our margins are well protected and ensuring the revenue is being recorded according to its ongoing plan for delivery and ensuring our deliveries as well are being provided to the customers with the right -- on the right time with the right quality. We spent last year, as we talked during our last call, focusing more for our destination in O West in ensuring the quality and delivering our first batches to the customers with a very high quality standard. On the Hospitality and Commercial business as well that we're going to cover shortly, we have seen -- we have experienced a very good growth during 2025 as well building on the bullish market in the hospitality overall in Egypt. We have achieved a year-on-year growth was almost 34% with a strong growth in quarter 4 and specific was 26%, EBITDA growth of 40%. That was actually delivered through multiple KPIs related to the hospitality business coming from very solid occupancy for the year on the 75% almost during the whole year and specifically reaching a very, very high occupancy levels in quarter 4 that is very demanding in the certain destinations like El Gouna, for example. On the ARR level, we have witnessed as well increasing ARR levels with very good rates, reaching almost near to EGP 7,000 per night during quarter 4 with a 26% year-on-year almost in quarter 4 alone. Therefore moving into the commercial assets, which is the highest almost growing business in our portfolio. We witnessed 45% growth year-on-year coming from almost EGP 3 billion to EGP 4.3 billion for the total year, introducing, as we said before, destinations like O West and Makadi coming to our portfolio of increasing, which we're going to see on the next slides, representing a very high growth and adding to the whole portfolio of commercial assets of Orascom Development. On EBITDA level as well where we can see 17% on a year-to-year basis. The whole commercial assets and recurring revenue became almost representing 40% of our total portfolio, which is a very important target and very important aspect that we worked on throughout our business objectives of increasing the recurring revenue items. Right now, it represents almost 30% coming from 34% in '24 and with a very strong and solid portfolio that we ensure having this continuing into the future. We go into the operational highlights of each destination [ consol.] If we have a focus on El Gouna, El Gouna overall from the 3 sectors are having very solid growth between '24 and '25. Overall, top line revenue coming from EGP 15 billion to almost EGP 20 billion representing almost 32% growth year-on-year. The whole business lines are growing between '24 and '25. Then as we have a land sale -- though we have a land sale in quarter 4 2024 that is not presented as the same -- it was not presented in our revenue in -- similar revenue item in '25, but we have a small land sale in 2025 was almost EGP 390 million. For O West, as we briefed before, our focus in '24 is on the foundation, ensuring the right structure of the management team. We had already changes on the management team. We have almost the whole management team right now is in place. We started this foundation in early 2025. We had the focus as well on our launches and our products on the quality of delivery and as well ensuring that we are providing a very competitive price into the future. So the 2025 was not the year for sales per se. It was a year of foundation and quality product into the future. We have experienced a good quarter 4 in terms of sales. And actually, we had a launch in early 2026, starting the year with a very solid ground in terms of sales. On Makadi, the main highlight for the year was introducing the 1 million square meter land plot addition to our portfolio in Makadi that has a beach front representing or having a mix of residential, commercial and hospitality components, whereby it opens a lot into the potential and unlocks into the potential of the destination itself, and into the future. In terms of sales, Makadi had a good year, I would say, in terms of total sales. Again, the main focus was on the quality side, which means bringing more into international sales, ensuring the year-on-year average selling price is increasing while not to be dragged again into the longer-term payment plans and the discounts that might be provided due to the price of [indiscernible] for the sales itself. Commercial assets in Makadi has been growing as well on the right pace. And we highly believe in the future of this addition of the 1 million square meter land. Quickly in terms of revenue, overall, Makadi had an increase of 25% between 2024 and 2025. If we can see as a highlight again on the commercial assets, it has the biggest increase in terms of year-on-year percentage. Taba Heights. As a quick summary, it has 1 hotel out of the 6 hotels is operating right now. Our objective in Taba Heights is ensuring a lower burn rate and actually reaching to the point where it has its own balance without a negative effect on the financials. And looking into the future, whenever there is a potential to open up again based on the geopolitical changes and dynamics, we would be ready for opening further hotel rooms as well. In general, 2025 had a better results, and we turned into profitability on the gross profit side, and we almost had 37% increase in revenue within the hotels that we are operating right now. Financials, we almost covered most of the figures. Again, we talked about the increase on revenue side, profitability. The one highlight that we would again talk about is the marginality, gross margin, the change between '25 and 24. It is actually related to recording a land plot sale in Q4 2024 that represent almost 3% out of this margin. If we just normalize this land sale effect between '25 and '24, we would reach the same almost profit margin. A very solid balance sheet, again, representing the results of the year, very solid cash position proving almost minimal change between '24 and '25, and that minimal change was directed to our O West destination for construction purposes. Overall, balance sheet represents a solid financial position for Orascom. Financing profile, we have overall key ratios improving between '24 and '25 with much better debt profile. We have a debt maturity profile that is extended to 2033 with almost cost of debt stands at 14.8%. Financing profile, again, if we're talking about our total debt in different currencies -- compared to our cash position in different currencies, we -- at the closing, we have almost 60% of our cash balance at the closing of 2025 is presented in foreign currency, which present a very solid and important aspect to us in hedging the future fluctuations of the currency. Cash flow statement, again, presenting very solid financials coming from our cash from operations that grown with a very decent 19% almost year-on-year. If we highlight the main CapEx is that mainly coming from infrastructure expansion in our different destinations, O West, Makadi and Gouna; and the financing, if we're just highlighting the financing cash flow, it is affected by the dividend distribution that was processed during 2025 to our shareholders. Thank you all, and we're opening the floor for questions.

[Operator Instructions] We have a question from [ Tokkah ]

[Indiscernible]

We can't hear you. Sorry. Tokkah, we don't get your voice clear. You have a question?

In the meantime, we have a question from our side. Have you seen any impact on hotel bookings or cancellations following the recent geopolitical tensions for the region?

Thank you, Marlene. It is -- we've seen something, a very minor effects so far, which is we don't really consider that as something that we look at. It's not material, Marlene.

We have another question. How do you see sales performing across your projects in 2026?

We actually believe in 2026 is going to be a much better year than '25. We believe that on the second half of the year as well is economically, things will be much better. And we believe that things will improve on the second half actually from second quarter into the end of the year. So in comparison to '25, in general, we believe it's going to improve. We have witnessed that as well in our launches that we've seen in Makadi and O West.

We have another question. Do you expect recurring income contribution to maintain at 41% or to increase?

Okay. Actually, we're working a lot on increasing that contribution. It is a very important aspect to us. Definitely, the weight does differ when real estate revenue increases, which is expected as well in 2026 due to construction and deliveries that we are promising for. Our target is to push that into the 50%, okay? Again, and it is important to us to maintain this above the 40%. We are working on different aspects across the all 3 destinations, ensuring that commercial areas are up and running on the right time with the right brands and the right utilization as well. So -- and hopefully, as well on the hospitality business. So in general, yes, we are targeting to maintain this at least at the 40% or increase.

Our next question, why did you resort to stop distributions for 2025 rather than a cash distribution like last year?

Okay. In general, the stock distribution is a very healthy thing to us as a company and to the shareholders as well. So we're not resorting as a cash distribution. It's that, we believe this is more valuable, especially with -- it is tax free, it is -- so I mean, it is a very different thing, but it would have a positive impact on the company and on the shareholders.

Our next question, could you give us guidance about the expected revenue from O West Club?

Sorry my net, can you repeat this again?

Sure. If you could please give us guidance about the expected revenue from O West Club?

Actually, can I add something on that? On that aspect the club is not opened yet. So we're not disclosing anything. The official opening of the club will be in April. Now we are in the soft opening phase. We have around more than 5,000 membership in the club. The club membership is around EGP 0.5 billion, and the club is not open for outsiders. So it's only O West residence for now. So we don't have anything regarding this for now. But we expect more contribution from the commercial side from O West in the current period. And you can see in 2025, the commercial assets have increased by 258% compared to last year. So this is a good indication that this segment will grow in O West given the opening of the club and starting of deliveries, which will deliver more than 1,000 units in 2026.

Our next question, can you please shed some light on the EGP 286 million other losses reported in 4Q '25 and the reason behind the 52% year-on-year increase in finance expenses?

Okay. So the EGP 286 million is mainly FX effect, okay? So that is actually related to our foreign currency balances, whether -- we have this as revaluation that is happening to the foreign currency balances from the liabilities and assets, and that is the net effect of which across all destinations. And the other number as well? Yes.

[Operator Instructions] We have another question. Excluding cost overruns related to O West, which were booked in 3Q, what are sustainable margins by project going forward?

Sustainable margins by project? In general, we're targeting the average margins that we are working for, which is 40% to 50% in general, across all destinations.

And for O West in specific?

O West, it represents more the Cairo average margins, which is -- it ranges with a lower margin. In general, it ranges between 30% to 40%, 45%. So this is a sustainable margin that we would target in Cairo markets.

We have another question. Have all the planned hotel renovation efforts concluded?

Mostly, yes, mostly for the big hotels. Definitely, we're not talking about Taba. We're talking about Gouna. So most of the big hotels are -- have been renovated, except Movenpick, which is -- already we started some mockup rooms for which -- our efforts for renovation. Movenpick and a couple of other hotels, but this is the most famous one.

Yes. The Movenpick is the biggest hotel, and it's around 442 rooms, and we will start the renovation in early 2027.

And could you please update us on the hotel addition plans for El Gouna?

We have a plan for a luxury hotel that is a seafront one, and we have already talked about that before that we're -- it's on a very premium land plot in El Gouna, almost 100 to 150 hotel rooms with a very luxurious branding. Later to that, we have a couple -- a plan for almost 300 to 400 additions of hotel rooms within the next 3 to 5 years.

In addition to that, adding to Mohamed, we already announced in the Makadi Heights, we were planning to add like a 5 star [indiscernible] boutique beachfront hotel in addition to the 30 rooms that will be added in Casa Cook during 2026. This will be added in Casa Cook Hotel in Gouna. So the beachfront in Gouna, in addition to the 300, 400 rooms and more rooms in a new hotel in Makadi Heights as per the announcement that we announced in last December.

We have another question. Can you please shed some light on the recurring revenue EBITDA and expected growth and margins for the recurring revenue?

The recurring revenue EBITDA ranges between 25% to 33% almost between different destinations, okay? It is the highest growing business lines that we have in our portfolio. We keep adding, ensuring to add as well leasable areas to our -- and the openings as well of our retail and different business lines as well, not only now. The margin itself for the recurring revenue might differ between different business lines. So for some businesses, it would reach up to 55% and 60%. But for the average and then the most conservative margins that we have, it ranges between 26% to 35%.

And adding on Mohamed, if you're talking about the recurring revenues, you have to differentiate between the hotels because the hotels.

Exactly. Yes.

The margins of the hotels is around 50%. So if you look for the full year this year, it's 50% compared to 48%. So the margins are improving on the hotel side, okay? And on the commercial assets, as Mohamed said, it differs between the different business lines, which is contains the hospital, the golf course, the marina, the extra works, the school, the other -- and many other things in that segment.

Our next question, do you hedge your foreign currency debt?

We hedge our foreign currency debt? We have presented that in our cash position as well, right? It's -- our cash position right now represent almost -- represented almost in 60% in foreign currency, right? And in addition, one of the most important operational aspects that we are running always is ensuring our international sales that bring on foreign currency to the operation. And the most important thing that we have in our portfolio, which is the hotels business, or hospitality business that ensures to us inflow of foreign currency.

We have another question. How much are you budgeting in terms of selling price escalations for the year?

Budgeting -- as budgeting, we cannot declare that exactly. But in general, we have a target of year-on-year increase like you have seen on the slides, not less than 15% to 20% and up to 30% to 35% increase on pricing, okay? This is in local currency. So in destinations like El Gouna, we have a target of year-on-year increase in foreign currency, definitely presented as well by those 30% when it comes to other valuations.

And also adding on that bit, I think also you need to have like -- next year, for example, in 2026 in Makadi, for example, the product mix will differ. So in 2026, we will launch the beachfront project in Makadi Heights, which will have a more average selling price, a higher average selling prices. The average selling prices for Makadi right now is EGP 123,000. So can you imagine the beachfront prices, it will be much, much higher. So I think the average selling prices, as Mohamed said, it will be more in some destination because of the difference of the product mix.

Thank you. [Operator Instructions] So there seems to be no further questions. Would you like to make any closing remarks?

Thank you all. Thanks for your time.

And looking forward to seeing you in Q1 and Happy Ramadan.

Thank you to ODE's management team, and thank you all for attending the results conference call hosted by CI Capital. Have a nice day.

Thank you all. Thanks for your time.