SODIC Achieves Record EGP 11.36 Billion Gross Contracted Sales in 2021 54% Yoy Growth With Large Contribution From Successful Launch of North Coast “June”

Sixth of October Development & Investment Company “SODIC” has released its consolidated financial results for the full year ended 31st of December 2021.

• Gross contracted sales: EGP 11.36 billion, up 54% YoY; 
• Cancellations: 17% of gross contracted sales;
• Cash collections: EGP 4.95 billion;
• Timely delivery of 1,163 units; 
• Revenues: EGP 6.92 billion, up 24% YoY;
• Gross profit: EGP 2.34 billion, up 31% YoY, reflecting a gross profit margin of 34%; 
• Operating profit: EGP 1.17 billion, up 14% YoY, implying an operating profit margin of 17%
• Net profit after tax and non-controlling interests: EGP 860 million, up 5% YoY, delivering a net profit margin of 12%.

Operational Review; 

Gross contracted sales for the year came in at EGP 11.36 billion, a 54% growth YoY, generated by the sale of 1,745 units across all projects, setting a new record for annual gross contracted sales in terms of both number and value of units sold despite challenges posed by the temporary suspension of sales on West Cairo 500 acres project in New Zayed.

Despite the limited launches, West Cairo projects accounted for 30% of gross contracted sales during the year, supported by the continued strong demand for the signature project The Estates. East Cairo projects accounted for a further 33% of gross contracted sales during 2021, driven by the strong performance of SODIC East, which contributed 17% to the year’s gross contracted sales. Finally, The North Coast made up 37% of gross contracted sales during 2021, on the back of the successful launch of North Coast project “June” during the fourth quarter of the year, which recorded some EGP 4.14 billion in gross contracted sales.

Cancellations of EGP 1.97 billion were recorded during 2021, representing 17% of the year’s gross contracted sales. This compares to a cancellation rate of 14% recorded during 2020. The increase comes as a result of the amplified cancellations on the 500 acre project due to its temporary suspension, with the project accounting for EGP 1.12 billion of cancellations during the year. Excluding cancellations on the 500 acre project, cancellations during 2021 would stand at 7% of gross contracted sales, in line with the historical average.

Net cash collections reached EGP 4.95 billion for the year, with delinquencies at 6%. This compares to collections of EGP 4.28 billion and a delinquency rate of 8% recorded during 2020. SODIC delivered some 1,163 units during the year, of which 345 were in West Cairo projects, while East Cairo and North Coast projects accounted for 800 and 18 of the delivered units, respectively. SODIC also delivered 1,163 units during the previous year.

Throughout the year, the company started delivery on several projects, notably residential project Six West and commercial project Polygon X in the flagship destination SODIC West, as well as Sky Condos, the first multi-family offering in East Cairo project Villette, and EDNC, the commercial component of East Cairo project Eastown and the company’s flagship commercial project in East Cairo. CAPEX spent on construction during the year amounted to EGP 3.3 billion, compared to EGP 3.4 billion spent during 2020.

Financial Review;

Revenues of EGP 6.92 billion were recorded during 2021, a 24% growth from EGP 5.73 billion recorded during 2020. Revenues during the year were mainly driven by deliveries in East Cairo projects which contributed 75% of the year’s delivered value, led by Villette, EDNC, and Eastown Residences, which contributed 35%, 21%, and 19% of the delivered value, respectively. Furthermore, West Cairo and North Coast projects contributed 24% and 1% of the delivered value during 2021, respectively.

Gross profit increased 31% YoY to reach EGP 2.34 billion in 2021, implying a gross profit margin of 34%. This compares to a gross profit of EGP 1.78 billion and a gross profit margin of 32% recorded last year. The increase in gross profits comes despite one-off losses for the recognition of the clubhouses in the amount of EGP 131 million.

Operating profit grew 14% YoY to amount to EGP 1.16 billion for the year, reflecting an operating profit margin of 17%, compared to EGP 1.02 billion of operating profit and an operating profit margin of 18% recorded in 2020, with the slight decrease in operating profit margin attributable to one-off recognition of sunk costs on Malaaz in the amount of EGP 17 million before relaunching the project as June, as well as sunk costs related to the 500 acres project in the amount of EGP 68 million due to the adjustment of the land plot location, in addition to one-off professional advisory fees of EGP 95 million. Excluding these one-off events, normalized operating profit for 2021 would be EGP 1.47 billion, an increase of 45% on a YoY basis and would reflect an operating profit margin of 21%.

Net profit after tax and non-controlling interests came in at EGP 860 million, growing 5% YoY and delivering a net profit margin of 12%, which compares to EGP 820 million and a net profit margin of 15% recorded during 2020, with the decline in the net profit margin as a result of lower operating profitability due to the recognition of one off costs in addition to a sharp decline in net finance income due to lower interest rates. Excluding one-off events, normalized net profit after tax and minority interest would come in at EGP 1.1 billion a 33% YoY growth, and would imply a normalized net profit margin of 16%.

Total cash and cash equivalents amounted to EGP 1.9 billion. This amount excludes some EGP 1.5 billion related to customer maintenance deposits, following the reclassification of some of the accounts on the balance sheet implemented as of year-end 2020.

Bank leverage remains low, with bank debt to equity standing at 0.38x. Bank debt outstanding amounted to EGP 2.55 billion as of 31 December 2021. SODIC has been gradually increasing leverage mainly to finance investment in recurring income assets. Debt to equity amounted to 0.37x at year-end 2020, with EGP 2.3 billion outstanding.

SODIC continues to invest in its assets portfolio in line with the company’s strategy to build a sizeable portfolio of prime leasable assets. Investment Property & Investment Property under Development balance amounted to some EGP 3.52 billion on 31 December 2021.

Total receivables stood at EGP 19.5 billion, of which EGP 5 billion are short term receivables providing strong cash flow visibility for the company. The new presentation of receivables reports a total of EGP 2.5 billion of on-balance sheet receivables, reflecting only those relating to delivered units already recognized as revenue. On the other hand, some EGP 17 billion of receivables related to undelivered units are disclosed in the footnotes.

Total backlog of unrecognized revenue stood at EGP 22.76 billion as of 31 December 2021, providing strong revenue visibility for the company. Following the reclassification implemented as of year-end 2020, the backlog can be calculated as the sum of the advances from customers account and the off-balance sheet post-dated checks related to undelivered units.

FY2020 Corporate Developments

• July 15th 2021, SODIC received a letter from the Ministry of Housing, Utilities & Urban Communities informing the company of some changes to the New Zayed area plans at large including the development of a new project adjacent to SODIC’s 500 acre land plot which would result in the adjustment of the location of SODIC’s land plot; 
• July 27th 2021, SODIC successfully closed its first securitization bond issuance for a gross receivables portfolio of some EGP 384 million;
• August 26th 2021, SODIC received a letter from the Sheikh Zayed City Development Authority informing the company that the proposal for a new land plot for the 500 acre project has been presented to NUCA’s Board of Directors; 
• September 2nd 2021, SODIC acquired a 123 acre land plot directly adjacent to West Cairo project “The Estates” that will serve as an extension to the existing project;
• September 13th 2021, SODIC signed a partnership agreement for a 280 acre plot on the North Coast and launched “June” project on the plot
• October 14th 2021, SODIC signed EGP 1.57 billion Long-Term Syndicated Facility to finance flagship development SODIC West.
• December 14th 2021, Investor consortium comprised of Aldar Properties PJSC and ADQ acquire majority stake in SODIC.

Shareholding Changes

Cairo, Egypt, 14th December 2021; A consortium comprising Aldar Properties (“Aldar”) and ADQ acquired approximately 85.52% of the outstanding share capital of SODIC. The all-cash mandatory tender offer, at a purchase price of EGP 20.0 per share, valued SODIC at EGP 7.1 billion. The offer was accepted by shareholders representing 85.52% of outstanding share capital, resulting in a transaction value of EGP 6.1 billion.

Aldar is one of the UAE’s largest real estate development and asset management companies by market value and the market leader in Abu Dhabi. The company is responsible for the development of iconic real estate across Abu Dhabi, including residential, commercial, and retail assets on Yas Island, the world-renowned leisure, shopping, and entertainment centre, and Saadiyat Island, the capital’s up and coming lifestyle and cultural destination. Aldar has a diverse range of business interests, including strategic investment, fee-based development management, schools, hospitality, leisure and entertainment, facilities management and more. A well governed and transparent company, Aldar prides itself on being customer centric and innovative with a commitment to corporate governance, operational excellence, sustainable practices, and talent development.

ADQ is one of the region’s largest holding companies with a broad portfolio of major enterprises spanning key sectors of Abu Dhabi’s diversified economy. The consortium has communicated its objective to advance SODIC’s position as a leading national developer by scale and reputation, growing the company’s portfolio of mixed-use residential communities in Greater Cairo, the North Coast, and other major markets.