Cairo, Egypt: Sixth of October Development & Investment Company “SODIC” has released its consolidated financial results for the financial year ending 31st of December 2018.

  • Revenues: EGP 3,726 million, up 62% YoY
  • Gross profit: EGP 1,226 million, up 39% YoY
  • Gross profit margin: 33%
  • Adjusted operating profit: EGP 728 million, up 52%
  • Adjusted Net Profit: EGP 815 million up 37%.

Consolidated Balance Sheet Figures as at 31st of December 2017:

  • Accounts Receivable: EGP 11.6 billion
  • Cash and cash equivalents balance: EGP 4.2 billion

Financial Review; Strong cash position and healthy results despite settlement

Revenues of EGP 3,726 million were recorded during the full year period compared to EGP 2,293 million recorded during the same period last year, reflecting a strong growth of 62% mainly driven by deliveries in new projects, namely in Caesar and Villette that together amounted to 45% of the delivered value during the period.

Gross profit reached EGP 1,226 million growing by a solid 39% and recording a gross profit margin of 33%, lower than SODIC’s usual margins but in line with expectations as deliveries in Villette’s first phases skew margins downwards.

SODIC’s operating profits were negatively impacted by the SODIC West settlement signed in December increasing the project costs by EGP 800 million, of which EGP 391 million were expensed in 2018. EGP 33 million of the expensed amount were allocated to the cost of goods sold to account for the share of SODIC West units delivered during the year, and the remaining EGP 358 million were added to other operating expenses in relation to total revenues that have been recognized in the period 2002 to 2017.

Operating profit amounted to EGP 336 million while adjusted operating profit, excluding the effect of the SODIC West settlement, amounted to EGP 728 million, up 52% and reflect a healthy operating margin of 20%.

Net profit of EGP 449 million was recorded during the year, while adjusted net profit to exclude the impact of the settlement amounted to EGP 815 million up 37%.

Total cash and cash equivalents amounted to EGP 4.2 billion at year end reflecting a very liquid balance sheet supporting the execution of SODIC’s projects as well as the company’s growth plans.

Bank leverage remained low with bank debt to equity at 0.31x. SODIC’s total bank debts outstanding stood at EGP 1.5 billion out of the total available bank facilities of EGP 3.2 billion.

The balance of land installments outstanding to NUCA as of year-end 2018 was EGP 428 million having fully repaid the installments due on Villette land during 2018. The remaining installments represent payments due on Eastown land, the last installment due on October Plaza to be paid in 2019.

Receivables of EGP 11.6 billion provide strong cash flow visibility, with delinquency rates remaining low at 4%.

Client deposits represents the backlog of unrecognized revenues from contracted sales of units that are to be delivered over the coming three to four years. SODIC’s client deposits as of the end of the quarter were EGP 16.6 billion providing strong revenue visibility for the company.

Net cash flows from operations for the full year ended 31st of December 2018 remained positive and amounted to EGP 277 million, despite the EGP 250 million payment made on the SODIC West settlement in December. This compares to EGP 549 million of net operating cash flows in 2017.

Dividends Proposal:

In light of SODIC’s liquid balance sheet, solid financial performance and strong cash flows, SODIC’s Board of Directors has proposed a cash dividend distribution of EGP 0.5 per share subject to the approval of the Ordinary General Assembly Meeting.

Operational Review: Doubling land bank to reach 7 million sqm of undeveloped land

SODIC delivered some 1,079 units during the period. Eastown Residences and the Courtyards were the largest contributors together constituting 64% of the delivered units. The year also witnessed the delivery of the first units in Villette and Caesar which represented 18% and 15% of the delivered units respectively.

Net contracted sales for the period reached EGP 5.2 billion, down 10% versus the same period last year. Cancellations of EGP 443 million were recorded of which EGP 223 million were attributed to a large sale in the Polygon, excluding the effect of which cancellations stood at 3.9% of gross sales well below the company’s historical averages.

Net cash collections increased by 12% to reach EGP 4.3 billion during the year, while delinquencies remained low at 4%.

Land bank expansion: 2018 was an eventful year for SODIC with respect to its land bank expansion with the company having added circa 4 million square meters of land to its development pipeline, replenishing its West Cairo and Mediterranean North Coast land bank.

North Coast: in February 2018 SODIC signed two revenue share agreements for two adjacent plots with a total land area of 1.3 million square metres. The agreement provides the land owner with a 28% share of the project’s revenue generated from the sale of units, while the balance represents SODIC’s share with no minimum guarantee to the landlord.  The plot is expected to generate total sales of over EGP 15 billion over a period of seven years. 

West Cairo: in September 2018 SODIC received the official award letter for a 500 acre plot allocated by the New Urban Communities Authority (NUCA). The plot, which was offered on a partnership basis, is located in the Sheikh Zayed Extension area and is expected to comprise over 5,000 units and adds eight years of sales to the company’s inventory in West Cairo. Management expects the signature of the revenue share agreement with NUCA in March 2019.

In November 2018 SODIC’s fully owned subsidiary “Al Yosr for Projects and Agricultural Development” received a letter from NUCA with respect to its 300 acre plot located in the Sheikh Zayed city extension area. The letter outlined NUCA’s decision regarding the change of land usage from agricultural to residential and the increase in allowable footprint to 20% and allowable heights of G+2in return for an in kind payment of 50% of the land. This development will expedite the launch of the project with the company aiming to launch the project in 2019.

-Ends-

About SODIC

SODIC is one of the region’s leading real estate development companies, currently developing a number of diversified projects in Egypt. SODIC’s developments in East and West Cairo and Egypt’s North Coast range from residential, retail and commercial projects to large scale mixed-use developments. SODIC is listed on the Egypt’s Stock Exchange (Ticker OCDI). For more information please visit www.sodic.com .

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