Orascom Development records a net profit of CHF 36.4 mn, with a strong performance from its operating segments in Q3 2014


Orascom Development Holding AG's (Orascom
Development) revenues increased by 12.1% to CHF 184.6 million (9M 2013: CHF
164.7 million), as strong Real Estate & Construction revenues and increased
hotel occupancy rates during the third quarter compensated for a weaker
hotel performance in the first half of the year. In September 2014, Orascom
Hotels and Development, The Group's Egyptian subsidiary successfully
entered into a real estate agreement with a third-party investor to
sub-develop a piece of land in El-Gouna. Red Sea Construction Company; the
Group's affiliate will construct the project. This agreement contributed
positively to the topline growth (CHF 11.5 million). The net profit
attributable to shareholders of the company reached CHF 36.4 million after
a CHF 75.8 million loss in the same period last year. The adjusted EBITDA
for the period was CHF 24.9 million (9M 2013: -4.9 million).

Revenues in Real Estate & Construction segment almost doubled compared to
prior year

Revenues in the Real Estate & Construction segment significantly increased
to CHF 60.9 million
(9M 2013: CHF 32.5 million), equivalent to 33% of Group revenues. The
increase is mainly a result of accelerated delivery of real estate units in
Egypt (El Gouna, Ancient Sands and Makadi) during the first half of 2014.
The adjusted segment EBITDA increased to CHF 19.1 million (9M 2013: CHF
-5.6 million). Contracted real estate sales, after adjusting for the
exclusion of the budget housing segment, increased to CHF 55.0 million (9M
2013: CHF 40.7 million), driven by continued strong momentum in El Gouna,
pick-up of client demand in Montenegro and the successful closing of a bulk
deal sale (37 units, CHF 8.9 million) in Salalah Beach in the third quarter

Hotels occupancy rate recovered to a very strong level of 63% during Q3

The hotel segment showed a significant rebound during the third quarter
2014 as travel bans to the Sinai Peninsula and the Red Sea area were
lifted. The average occupancy rate for the summer months reached 63%
compared to only 42% during the first half of 2014. Importantly, all
destinations contributed to this positive result as the Adjusted EBITDA for
Q3 2014 reached CHF 5.2 million vs. CHF 2.2 million in Q3 2013. The full
activation of the cost-control and optimization strategies announced back
in December 2013 supported El Gouna Hotels to mark a 79% flow-through
during Q3 2014 vs. Q3 2013. We were also able to re-open three of our
hotels in Taba Heights , post the floods that occurred in May of this year;
the three hotels are currently operating at their full capacity with an
average occupancy rate of 57%. Salalah Rotana Hotel in Oman started
operating at full capacity in July 2014, with 399 rooms. Much to the
success of Q3, revenues for the first nine months 2014 were still below the
comparable period (9M 2014: CHF 78.9 million, 9M 2013: CHF 96.5 million).
The average occupancy rate for 9M 2014 reached 49% (9M 2013: 52%) and
TRevPAR (Total Revenues per Available Room) reached CHF 43 (9M 2013: CHF
53). The adjusted segment EBITDA amounted to CHF 8.9 million (9M 2013: CHF
21.1 million). At the end of the reporting period, the Group operated 7,382
hotel rooms.

Achieved CHF 30 million of overheads savings compared to FY 2012 cost base

Generic cost savings in addition to the carve-out of the budget housing
operations and the construction segment, in Egypt in June 2014, started to
contribute positively to the Group's cost savings program in the third
quarter of 2014. Due to the reduction of contracted and non-contracted
labor by about 2,500 FTE the quarterly cost run-rate was reduced by about
CHF 2.2 million. As of 30 September 2014 Orascom Development has achieved
total overheads savings of CHF 30 million compared to the cost base FY

In August 2014, the Group announced the successful share sale of CMAR, the
holding company of the Club Med hotel in Mauritius. The Prime Minister of
Mauritius approved, in principle, the transaction and closing is expected
before year-end.

Subsequent events

Based on the recovery of the Egyptian economy and the increased demand on
the investment opportunities in Egypt, The Group is evaluating the sale of
10-15% of its Egyptian subsidiary; Orascom Hotels and Development (OHD) in
order to reactivate its trading on the Egyptian Stock Exchange. The
proceeds of the sale, if conducted, shall be re-injected into OHD to
support its ongoing operations and deleverage its balance sheet

Outlook for FY 2014

Orascom Development has achieved significant progress in terms of
restructuring its operations and cutting costs. As of today, the operating
segments have started to positively contribute to the Group's results,
namely the Hotel's segment witnessed a significant increase in terms of
occupancy rates accompanied by an improved flow-through. Additionally, the
Real Estate arm has been witnessing a positive sales momentum with a
significant boost during the third quarter of the year not only in Egypt
but also in Oman and Montenegro.

In light of the more favorable market environment, the focus will
increasingly shift from cost cutting to generating business opportunities
to capitalize on the Group's portfolio of hotels and real estate projects.
Further balance sheet deleveraging remains a key focal point and shall be
the main focus of management in the coming period.


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