Orascom Development Holding AG (ODHN) Earnings Call Transcript & Summary

Good afternoon and good morning for those joining us from the U.S. I'm Sara Gawahergy, Head of Investor Relations at Orascom Development Holding. And on behalf of the group, I would like to thank you all for joining our first quarter 2022 results call. Our call will start with a presentation by our CEO, Omar Hamamsy; and our CFO, Ashraf Nessim, followed by a Q&A session. I now hand over the call to Omar. Please go ahead.

Thank you, Sara. Good afternoon. Good morning, everybody. I hope you're all well. We had a very strong positive first quarter, continuing very much to build on our strong operational as well as financial performance across all our lines of business, across all our destinations, a very positive quarter for us across the board, continuing a nice string of quarterly continuous improvements along the way. Let me try to capture a few summary kind of highlights for you, and then I'll pass it on eventually to Ashraf, our CFO, who will walk you through a little bit more details through our P&L, our balance sheet and our cash flow statements, and we'll revert back again for any commentary and questions in the back end. So top line revenues are up a very healthy 33% against the same quarter last year at CHF 142 million. Our adjusted EBITDA or operating EBITDA is up to CHF 37.5 million, up 26% -- up 27%, sorry, from last year, with a margin of 26.4%, a very healthy and comfortable margin for us. Our profit as share of associates has actually turned to CHF 11.6 million versus a net loss last year. That was primarily enhanced by the performance of Andermatt Swiss Alps, our Swiss destination for on which we've been -- and with which we've been working very hard over the last year or so to put together an accelerated path to profitability and which is beginning to show already in the first quarter of this year and something that will hopefully continue in a healthy way going forward for us, along 2022 and beyond. As a consequence of all these outcomes, we turned a positive net profit, once again, of CHF 17.5 million versus the equivalent CHF 3 million a year ago, and that actually is hiding an even better operating profitability if we exclude the one-offs like foreign exchange losses due to the Egyptian pound devaluation or any other one-off transactions. Our actual net profit was up to an even healthier CHF 26.6 million for the period. So very, very exciting net profit position here. And our cash flow operations stands at CHF 6 million for the quarter. Let me walk you through some highlights at the BU level at the different businesses that we have level. Touching first on real estate. Our net sales are down actually 8.8%, but that actually hides a much healthier trend underneath, which is that for Egypt, particularly for the Egypt destinations, our net sales were actually flat, which is a great accomplishment in Egyptian pounds, of course, great accomplishment given the tremendous uncertainty that shook the whole region, I would say, and particularly Egypt in the first quarter, driven by the Ukrainian crisis and resulting devaluation of the Egyptian pound. So our sales withheld a nice strong way in Egyptian pounds. And of course, between the combination of the devaluation of the Egyptian pound and the strengthening -- the more recent strengthening of the U.S. dollar vis-a-vis the Swiss franc, we ended up showing here an 8% decrease in sales. However, our deferred revenue balance still remains very positive, up 12%, and our receivables portfolio is up 14% in CHF. Those numbers are obviously even healthier, much healthier in Egyptian pounds, and that gives us comfort that the operational health of our mix and upward portfolio is extremely strong. On the revenue side, our real estate revenues, which contributed a big chunk of our total revenues for the quarter are up 12%, 13% at CHF 94 million. Profit margin stable -- or profit stable at CHF 37.5 million. Good note, great note, in fact, despite Omicron, which hit us pretty hard in January and a small piece of February for this year, we actually turned a very positive hotel performance, financial performance. Our hotel revenue is up almost 180% at almost CHF 30 million, with the profit margin up dramatically at CHF 5.2 million, that's up 316%. And then equally importantly, our continued increase in our recurring revenues that come to us from our destination management fees or town management fees which is CHF 18 million, up 44% with the profitability also dramatically increasing there. If you look at the split by segment, what I love about this is, not only have we managed to dramatically grow our top line but we've also -- we're also gradually rebalancing the makeup of this top line. So now hotels are starting to get closer to their fair share. We still have ways to go and I think we'll be getting there pretty soon, I hope. But hotels are getting 21% now in comparison to 10% contribution only in 2021. While the town management contribution continues to increase gradually across the board and everything along the way is growing at a very healthy clip. If we look at it from a destination or a geographic perspective, of course, as usual, El Gouna continues to be a very important half of our business, and that's a half that we continue to monitor and focus on very strongly, beginning -- come back, slow come back for Salalah in Oman, which is very healthy, again, primarily our hotel segment there, and we expect this to continue to accelerate throughout the year. We're hoping for a very positive second half of the year, particularly Q4 in Salalah. And then, of course, O West, which we've been talking about and which has been continuing to be a very important contributor to our overall picture and to our numbers, both sales revenue and profitability-wise, a very important contributor for us. Let me give you quick highlights of where we stand across the board. Just a quick reminder for those who may not know us. We have about 100 million square meters of land across 7 different countries. We have about 1/3 of that land -- north of 1/3 of that land that's been already developed. The rest is still a virgin land bank, which we're gradually working on, and we operate 9 destinations across these territories with 33 hotels and almost 7,200 rooms in those destinations. Let's start with El Gouna, and I'll start focusing on the financials immunity. As you can see the story here, very positive on the hotel front. Occupancy rates somewhere in the vicinity of 60% versus 26% the year before. GOP, gross operating profit, significantly up 845% per available room and 1,000% overall. So very, very positive contribution. Very healthy revenues, also quality of revenues. Our TRevPAR, as you can see here, is up quite dramatically, and that's something that gives us a lot of confidence about the trajectory in which we're going in our hospitality business in El Gouna. Real estate sales, as you can see, very important metric for us. The most important metric from a health perspective is our average selling price. That's up 25% to 4,460 versus 3,500 a year ago with a reasonably healthy increase -- well, a reasonably healthy level of sales despite the showing as a 16% decrease here. It's actually a pretty healthy level for us, given again the tremendous uncertainty that shook the Egyptian market in the month of March and affected us. In our last sales sort of event, which was around the local equivalent of Easter holidays or actual Easter holidays and the mostly Easter holidays, if I may call it, we actually witnessed extremely strong net sales also in El Gouna. So the trajectory there is very positive. One comment I'll make simply and that applies across the board in Egypt, we will protect our margins in relation to volumes of sales. So we are willing and are comfortably trading off marginal sales decrease if and as long as we're able to maintain our selling margins in real estate. That's a very important metric for us for the health of the destination as well as also in order to protect the future profitability of the company. So that's kind of the overall results there. Just to give you a bit of a sense, a little bit of commentary on what's going on in El Gouna as a whole. We've launched some new [Audio Gap] there, The Nines, that's our new real estate project, very well received in total inventory of about $60 million. We've added new inventory in 2 of our very successful projects already there, Shedwan and Cyan. As I said earlier, our occupancy rates in our hotels has been very healthy and our average room rates for Q1 were somewhere in the vicinity of CHF 75. That's up from CHF 66 a year ago. Also, the nice thing is the return of foreign tourists or international tourists over there. They represented about 54% of our total occupancy in El Gouna, and that's something that we're very excited about. And then last but not least, in El Gouna, we're actually using 2022 to do a lot of the renovation of our hotels. So many of our large boxes are going to be -- are being upgraded in the process of being upgraded. And that should allow us to enter the last quarter, which is our peak quarter or the 2023 in a much healthier position in terms of our ability to price and attract the whole different segment of customers, both inside and outside Egypt for hotel revenue. So we're very, very excited about this. It's the first major round of renovations we're doing in El Gouna for hotels in pretty much the last 20 years or so. So -- and we're launching or we'll be opening our Chedi Bellevue hotel in El Gouna sometime in quarter 3, hopefully before the El Gouna Film Festival, and we expect this to be a very exciting success and to help move the destination, the quality of the destination to a whole different level. Shifting gears to O West, our second most important destination currently. Again, primary element to look at average selling price, that's up 20% for the period. Very excited about this. And our net sales were up 30% in CHF terms, which is very, very promising. This continues to be a very competitive market. That's the Cairo primary home market. Having said that, we continue to affirm our leading position in pretty much half of that market, which is the western part of Cairo where we compare ourselves very clear [Audio Gap] to competition and see that we've been the most successful not only in the last quarter, but frankly, in the last few quarters, a developer on the western side of the capital city of Egypt. We're speeding up our construction base for 444 villas that are currently progressing as well as 864 apartments, which will start deliveries pretty soon. We're also launching -- or we've laid out the foundation stones for what's called the O West Club. That's a very important place-making landmark over there, which also frankly allows us to generate recurring revenues because we continue to add memberships to this club. We now stand at almost 2,500 memberships in the club before having it up and running for the time being, and we've managed to increase the fees associated with this club, and that's something that's turning a very positive result for us going forward. Makadi Heights is our third destination in Egypt, which we had tremendous momentum in over the last couple of years. And again, here on our selling price, we continue to maintain that momentum. Our selling prices are up 16%. Having said that and because of -- or part of the current discussions that we're having with the Egyptian government, we're in the process of actually purposely, very purposely slowing down the sales there until we fully sort of confirm the official status of the Egyptian government on the Makadi lands so that there's no dispute over there. And we're using this opportunity to do 2 things in the meantime for our customers, which is going to -- which are going to strengthen our position going forward. The first one is, we're delivering actually almost 250 units by July 2022, so within the next couple of months. And these are, for the most part, early deliveries, and that's super exciting for us and for the place making of the destination and for our happy customers and future residents. The second thing we're doing is, we're focusing actually on our town management services and elevating the quality of our account management and the place making in Makadi by adding a lot more commercial shops, restaurants, et cetera, and offering a much wider set of services to our customers to improve the livability of the place and to ensure that our customers and our residents are absolutely delighted to be in one of our better destinations. So that's the story overall on Egypt. Perhaps 1 quick double-click on Oman and looking at Salalah. In Salalah, as you can see, the hotels are starting to come back. All the metrics are pointing in the right direction, very similar to the metrics in El Gouna. Again, despite a strong Omicron threat in the first month or 1.5 months of the year or of the quarter, so despite that, we managed to close with an occupancy rate of 54% and significantly improved revenues per available room and profits per available room. As a consequence of this, you see also our real estate performance significantly improving. A lot of that tends to be tied to our visitors coming and seeing and experiencing the destination, something we intend to sort of make that correlation much stronger over time. Again, average selling price is very healthy, up 2.6%, and our net sales are up almost double for the period against Q1 of last year. So very excited about the pickup in Hawana Salalah and we hope that this continues. A quick overview of what's happening in Lustica, which is in Montenegro. Again, a very healthy trend across the board. Average selling prices for real estate, up 7% and net sales up 25% quarter-on-quarter and the hotel performance way stronger than ever before. 28% occupancy, healthy TRevPAR or total revenues per available room and relatively healthy or pretty stable, I would say, GOP levels. Again, our peak -- our Q1 is typically our toughest quarter for the hotel operations in Montenegro by definition. It is not the high season for the Adriatic sea. And the real season begins somewhere in the second half of Q2 and into Q3, where we're very optimistic that the place-making investments we've been [Audio Gap] are in Lustica are very -- are going to come to fruition and come very quickly. We're still handing over a bunch of units in the Marina Village. There's about 15 units being handed over, and we're handing over 88 units in Centrale, which is kind of the main sort of development area now where we're operating. And we've begun the construction of almost 200 new units between Centrale and the Marina Village area. We're also about to launch very soon some of the retail and the town center piazza. Some of it is under construction and due for launch very soon. And we're hoping to basically have a very high occupancy rate, as I said, during the peak season for the summer vacations in Lustica. That's all looking very nice. Let me pass it on to Ashraf, my colleague and CFO, to walk you through the integrated financials, and we'll come back for some commentary on the back end.

Thank you, Omar. Good afternoon, everyone. Well, I will try to highlight some of the numbers on the P&L and on the financials in general. And I will start by basically looking at the margin. You can see that the margin went down from 33.4% to 30.8%. The main reason for this is that in O West this year, we are recognizing the construction revenue coming from O West that we sold 2 and 3 years back. And as you remember, we started our journey in O West with relatively lower prices. Currently, we increased the prices, I would say, dramatically compared to the beginning of 2019. And this is why you can see that there is -- this drop in the margin overall. At the same time, we are increasing a little bit our G&A, mainly in order to achieve our sales targets and to achieve our revenue in general across all segments. We are improving our centers of excellence in general in order to have a lot of expertise along the group in the different segments that we work in. And therefore, you can see a bit increase in the G&A. But having said that, the adjusted EBITDA is on a very good path, almost CHF 37.5 million compared to CHF 29.5 million last year. So we are in the right direction in general overall on the EBITDA level and the profitability level. The other number that was mentioned by Omar related to the devaluation of the Egyptian pound, which has had an effect of FX losses of 8.7 million affecting the other gains and losses here in the P&L. While this was compensated with the great performance of Andermatt in Q1 overall and for the first time, having this almost our share of CHF 10 million of profit coming from Andermatt alone, so we are very optimistic about Andermatt going forward in the next couple of years. You can see as well that our finance costs start to increase CHF 9.1 million compared to CHF 8.2 million. And you can imagine this is coming from the LIBOR rate that started to increase and as well other, I would say, countries also increased their rates in order to compensate for the inflation in general. So this trend is expected to continue for the year to have an extra finance cost overall compared to the previous year. All of this had the effect of having an excellent profitability for the quarter, CHF 17.5 million compared to CHF 3.1 million in the same period last year. On the balance sheet, it is relatively, I would say, straightforward coming from the normal business operation. And overall, there is maybe some reduction in inventories or receivables compared to previous year. I would say this is mainly because of retranslation of the Egyptian currency to EGP because, as you know, Egypt is still dominant. And therefore, we need to translate all the balances in EGP to CHF. So this is why it is a little bit going down compared to the previous year. This is the main effect on the balance sheet side. Here, we see the financing profile. And as you know, I would say, 80% of our Egyptian subsidiary, 80% of the debt of our Egyptian subsidiary are either in euro or in U.S. dollar. And -- but at the same time, since we have almost 50% of our revenues in the hotel segment coming in foreign currency, so we have -- on the cash flow side, we have good sources of foreign country to pay our debt service overall. But once a devaluation happens, it affect the P&L overall, but not the cash flow, I would say. The last slide is related to the cash flow. You can see that as part of the mitigation of the inflation across the world, we decided internally since I would say, Q4 of last year to start to increase the construction level overall across all the destination to make sure that we buy and contract all our deferred revenues that is expected to be completed within the next couple of years to hedge against inflation. So we have to spend a little bit on the cash to make sure that we buy all the raw materials for -- to do deals with the contractors to make sure that our prices or our costs are -- is locked to make sure that our profitability will not be hit or will not be affected either -- much by any inflation that is expected to come or what is already tapped. Also, you can see that the payment for PP&E, which is the CapEx because we have a full renovation plan that is being done on the hotels, specifically the hotels in Gouna, which are relatively needs -- need some renovation. So we are heavily investing in the renovation in this year in 2022, and also, to some extent, in 2023, we'll do the same in order to be prepared for the next phase of the, I would say, the hotel revenue that is coming back and the hotel business that is coming back overall. Having spent on the CapEx or even on the construction, but you can see that still we have a good cash balance across overall for destination. So almost CHF 187 million of cash overall across all our divisions. This is it. And we'll go back to Omar for the outlook.

Thank you, Ashraf. So a quick update on the outlook for the rest of the year. As you know, of course, with the current Ukrainian conflict ongoing, which has had a domino effect on the Egyptian economy quite dramatically as well as also some of our source markets, what's happened is that in Egypt, for example, the Central Bank of Egypt has raised interest rates by 1 percentage point. The Egyptian pound was devalued officially at 14% to the U.S. dollar on 21st of March. Of course, energy and commodity prices continue to increase and have been at all-time highs, I would say, for the most part, for us, at least for input materials for an all-time high. And so all of this continues to create some level of uncertainty despite the fact that we have much of it well hedged for and well built into our business plans for each of our launches, for each of our operations. And with the fact that we -- that's on the real estate side. And of course, on the fact that from a hospitality perspective, we continue to run still a very lean operation that we had built up during COVID in order to maintain our resilience. I'll give you -- so we will not be giving any formal guidance in terms of expectations of numbers, et cetera. But what I can tell you a little bit is, a, we continue to see our business being very healthy as Q1, I think, has clearly demonstrated; and as the outlook and as so far, Q2 has been going quite smoothly, so we're very optimistic about 2022 as a whole. In the Hospitality segment, for Egypt, which has roughly half our hotel rooms or a bit more, we continue to focus on attracting our traditional Western European, primarily German source markets that feeds in Gouna very healthily, and that's what's been driving our business so far in Gouna for the international component. We're continuing to do all the renovation work that I highlighted and we are seeing already an increase in our ARRs and we continue -- and we expect to see a further increase in those ARRs once the renovations are done. In Oman, particularly in Salalah, we're gradually reopening our hotels. You saw the occupancy levels that we had. And now we are getting very, very positive signals from most of our tour operators that the frequencies, the volumes, et cetera, should be much better towards the latter part of the year. So we're excited about that, and we're optimistic about that. In Ras Al Khaimah, in RAK, in the UAE, we're actually also continuing with some renovations. We have about 205 units that we're going to be renovating completely by the end of the third quarter of this year. And so we're hoping to catch the peak season, which starts roughly in the November time frame, right on time for a very healthy, we hope, Q4 and onwards into 2023. So hospitality, we're really seeing a very exciting turn from the COVID years despite end. We're maintaining a very vigilant and very cost cautious sort of outlook while doing those renovations that, as I said earlier, haven't been done in many of our hotels for over 20 years now. On the Real Estate segment, the name of the game here for us is to maintain margins and make sure that our prices are healthily factoring in potential further inflationary pressure as well as potential further devaluation that might happen in some of our core markets like Egypt. And one of the ways that we do this is that we make sure that we're contracting our work much more quickly after the sale has been done. We're also activating an international sales capacity. We opened up -- we opened our international sales -- our first international sales office in Dubai earlier this year. And we're getting very, very positive traction, very positive word of mouth from early clients. And we're hoping that this is going to be one of the important elements that enables us to have cross-selling opportunities between our different destinations. So that's also proceeding quite nicely. And finally, on town management, as we said from the beginning, we think this is a very important element that generates recurring revenues and recurring profits that is very predictable, that is relatively stable, and it's something that we're going to continue driving forward. There are plenty still of opportunities and plenty of room for us to grow there. We chose 1 area in the last about 12 months or so to focus on. It's been the extra works in only 1 destination, and that's already shown its impact on our financials very dramatically, as you've been seeing quarter-on-quarter and year-on-year. And we're hoping to continue adding more of those offerings along the way and expand it across all of our destinations over time. At that, I will stop and give it back to Sara, our moderator, to take us from here.

Thank you, Omar and Ashraf. [Operator Instructions] Our first question comes from the line of Ferran Tort. Would it be possible to have more details on the positive performance of Andermatt, even though it's still not consolidated?

Yes. Look, we can give you a little bit of insights. And I think over time, frankly, we are going to start talking a little bit more openly and more transparently on the numbers for Andermatt. But let me try to give you maybe the broader perspective first, and then we can give you some numbers. So the broader perspective was that Andermatt or ASA, as we call it Andermatt Swiss Alps, was historically on a trajectory to profitability that was quite extended. And one of the first priorities that we decided upon starting about a year ago or a little over a year ago was that we needed to get to that level of profitability and stopping the bleeding in Andermatt much faster. Two things we did so far, and you're starting to see just the very early signs of the results with the black ink or the positive numbers of profitability that you've seen there. The first one is a very -- a much more targeted look at both the top line, i.e., the pricing and the product offering as well as the bottom line or the cost components. We had a very systematic effort where our central transformation team, together with the local leadership, looked at all elements of cost and identified a whole bunch of opportunities where either a combination of offshoring or outsourcing was going to help us. Combinations of rights and rightsizing and value engineering, et cetera, were conducted and opportunities for centralization of certain functions were also conducted. And that has resulted in a dramatic decrease of our cost base while significantly accelerating our revenue base. That's 1 big kind of avenue of efforts that the team over there has been driving quite systematically and with very impressive results over the last few months. The second effort was the Vail transaction, which was announced about 1.5 months or so ago, as it's a transaction that we had sourced about a year ago and that we had been working on quite diligently for about a year to make it happen. They're basically -- and I want to use this also as a clear model for us to explain how we intend to do business going forward in many other places. What we did here is basically we brought the globally best key operators in the world that's Vail Resorts, a publicly listed New York Stock Exchange multibillion-dollar company, American company. They operate resorts in over 40 different world-class resorts around the world, primarily in the U.S., Canada and Australia. And they are the ones who reached out to us, which is a sign for us and something that gives us a lot of confidence in terms of, again, the quality of the operations that we're building and the destinations that we're investing in. And we worked out a transaction whereby they effectively bought 55% of our ski operating business for somewhere in the vicinity of CHF 150 or north of CHF 150 in a 2-step transaction. And they will be operating our ski operations in Andermatt with the extreme quality and extreme operating effectiveness that they have demonstrated in all of their different destinations over the years. It's their first deal in Europe, and it was a real privilege for us that we were the selected destination of the selected ski station or ski resort that they came knocking on the door of and consumed this transaction with. And it's a tremendous sign of faith in Andermatt and the future of Andermatt. And so -- and I think that's the second pillar. Just to summarize the second pillar of what drive -- what's going to continue to drive the very positive economics that we have in Andermatt. Today, I want to highlight that in Andermatt, to give you a bit of a sense, the average selling prices of real estate are extremely high. They're somewhere in the very high teens, low CHF 20,000 per square meter. They are rivaling definitely some of the very, very well established and very sort of older and historically very prestigious ski resorts around the Swiss Alps and the Alps in general, and we're very quickly catching up in terms of the pricing over there, just to give you also another sense of how we're doing. So that's kind of the overall point on ASA. I'd like to also just use this opportunity to explain that the type of deal that we conducted in Vail is a very important blueprint for the type of transactions that we're doing and we're trying to do right now in multiple different destinations. We are going to be continuing aggressively to bring in best practice, global leading or regional leading depending on the different types of businesses, operators and owners with us across our different assets, be they hotels, be they marinas, golf [ courses ], schools, hospitals, airports, retail locations, et cetera. We think this is one of the very important elements for us to enable us to [ deasetice ] a little bit while ensuring a very steady stream of recurring revenues and much, much more importantly, a significant increase in the value of our land, which is ultimately what enables us to sell real estate at the prices and at the margins that you have been seeing for the last few years.

Thank you, Omar. Another follow-up question from Ferran. Would it be possible to have a comment on the litigation so far over the environmental case and the Makadi land bank, please?

Sure. The commentary that we'll make is the following. I mean these are obviously extremely important cases for us, Orascom Development Holding, and frankly, for the government of Egypt. We are currently having very positive communications with the government of Egypt through multiple different channels, multiple different official sort of channels, different ministries, different government entities in order to come to a, hopefully what will be a swift, but at least a fair and legally compliant outcome. The outcome here will have to protect the private rights and the rights of private companies in Egypt, such as ourselves, and we are fully comfortable with our legal brand and the legal basis for everything that we have been doing that we are doing currently. And I think I'm happy to report that the government of Egypt and our counterparties in the government of Egypt are showing all the understanding, the professionalism and the sort of inclination to ensuring the rule of law and the fair treatment of private entities in the country to come to a very reasonable resolution of all these matters in a timely way. So that's something that we're working tirelessly on. There are multiple channels that are open. There are multiple conversations taking place. We hope that ultimately those get resolved quickly. But of course, impossible to put a hard deadline or a hard time line on them. And as and if any significant news comes up or any material news comes up, we'll be very transparently sharing it with our shareholders and our investors.

Thank you, Omar. A follow-up question. How does the devaluation of the Egyptian pound affect your business overall? And how far do you think this devaluation will continue?

Listen, it's got -- it's got 2 impacts. On the one hand, if you take El Gouna, which has its real estate price and its hotels for -- mostly for foreigners and the real estate for everybody, priced in U.S. dollars, that is basically a relative cheapening of the real estate and relative keeping of the real estate in relation to -- for the Egyptian buyers, right? Sorry, for Egyptian buyers -- sorry, for foreign buyers and foreign tourists as well as Egyptians living abroad who do represent a decent chunk of our customers. As a consequence and because of the fact that everything is priced in U.S. dollars, we do have some protection from a pricing perspective. Demand is what may end up being a little bit affected when there's uncertainty. But the reality of the way that the price points have been evolving in El Gouna over the last 30 years, I think is making it very clear to many of our local buyers that it's a good investment asset like most other real estate assets in Egypt. So that's 1 impact that's on the kind of positive side and I say kind of positive side, of course. On the negative side, our cost of doing business, either from a COGS perspective, cost of goods sold, so the steel prices for us, the cement prices for us, the aluminum prices for us, et cetera are increasing because most of these are imported from outside Egypt. So that's a negative. And of course, to some extent, part of our operating expenses, for example, in restaurants, in our hotels, et cetera, do also see some inflationary pressure due to the devaluation of the Egyptian pound. Having said that, the mechanism that we're using and that you've seen already partially in Q1 and that we're continuing to employ in Q2 and going forward is, a, for us to very actively contract. We're right on the back of sales so that we are not exposed to further inflationary or devaluation risk; and b, and more importantly, perhaps, is for us to ensure that we are constantly being very passing on a lot of these cost increases to our customers via the mechanism of price increases, be it on the real estate side, and you've seen how our pricing has evolved in El Gouna, in O West, in Makadi as well as also on the hospitality side particularly after we finish the renovations here. That gives us quite a bit of space to increase our pricing to make up for the potential for inflationary cost pressures that we have. Do we have a good insight into what might happen to the Egyptian pound value going forward? No, like everybody else, I think there's still a; reasonable amount of uncertainty as to whether this devaluation step was the last 1 for the next few years or not. Our posture internally here for planning purposes is that we are expecting at least 1 more round of devaluation and we are gearing ourselves from the pricing, from operations, from a purchasing and from the controlling of our OpEx as well as management of our debt to make sure we're 1 step ahead of that.

Thank you, Omar. Another question coming from Dan. When will you share an update about potential distribution of dividends, the increased market liquidity of ODH, the sale of additional land plots? I remember you mentioned that this will be shared in the upcoming AGM. But unfortunately, it wasn't concluded in person. Can you please let us know when will you be able to give us an update on those matters?

Yes. So look, Dan, in the same way as basically we're saying that had we come out of Omicron -- sorry, of COVID. And by now, we would be dealing with only very, very minor traces of the impact of COVID, we would have been able to give you some projections on the business going forward for '22 and give you much more accurate guidance, including what do we do about dividends, including what is our policy on land, et cetera. We would have been able to give you an answer. Unfortunately, we came out of COVID and immediately entered into this whole Ukraine crisis, which has had quite a bit of a potential negative impact on the economies of our source markets, that's Europe and Eastern Europe and Western Europe, as well as our core operating markets like Egypt. And so it's going to be hard for me to give you a specific date given I don't have any visibility on when the Ukraine crisis ends, when the global economy begins to stabilize, all these inflationary nervousness that's going on in the markets, as you can see now, is making it tremendously difficult to make such predictions. So we're going to refrain from making such predictions. What I can tell you is that our continued focus on accelerating profitability in a predictable and stable way, which is what we said we're going to be doing 2 years ago or so 1.5 years ago when we started, that journey continues very stably, very much along the same pace, and we're very optimistic about that. Similarly, our ability to generate free cash flow to our equity holders, now whether we choose to then give them out as dividends or not, that's a separate discussion, and it will mainly be one that's to be for the Board of Directors. It's something that we're also focused on very strongly. And whenever we have a specific -- well, a, when we have some stability on the outlook and b, when we have specific guidance on those 2 topics, we'll very happily share it. As to your question about land sales. Look, if you look at our numbers, they're very comfortable. If you look at our debt coverage ratios, they're very comfortable. If you look at our profitability, and it's also very comfortable. So we don't see a particular hard urgent need right now to be doing land sales per se just in the spirit of doing land sales. But certainly, should there be any complications or should there be a need for us to get a mark-to-market on our land, or should there be very strong opportunities for us to sell land in return for recurring revenues going forward, that is -- these are definitely types of transactions that we're negotiating, talking to people right now on. And again, we'll be sharing them as they materialize as they close and as appropriate. Same as we did with the Vail deal. We're only able to disclose these things, these negotiations, these outcomes after the fact rather than as they're going on.

Thank you, Omar. [Operator Instructions] I'll pause here and give it a few moments for questions to populate. We have a question coming from the line of Daniel Burki. Daniel, your line is now open. Daniel?

Do you hear me?

Yes, we can hear you now. Go ahead.