SODIC Releases 1h21 Results; Record 1h for Gross Contracted Sales and Strong Performance With Growth Across Financial and Operational Kpis

Sixth of October Development & Investment Company “SODIC” has released its consolidated financial results for the six months ended 30 of June 2021.

Gross contracted sales: EGP 3.76 billion, up 99% YoY;

Residential sales: EGP 3.67 billion of gross contracted sales, up 101% YoY;

Cancellations: 9% of gross contracted sales;

Cash collections: EGP 2.47 billion;

Timely delivery: of 264 units;

Revenues: EGP 1.87 billion, up 48% YoY;

Gross profit: EGP 652 million, recording a gross profit margin of 35%; 

Operating profit: EGP 292 million, reflecting an operating profit margin of 16%;

Net profit after tax and non-controlling interests: EGP 223 million, delivering a net profit margin of 12%

Operational Review:

SODIC sold 621 units during the first six months of 2021, generating gross contracted sales of EGP 3.76 billion; an increase of 99% over EGP 1.89 billion of gross contracted sales during the first half of 2020.

West Cairo accounted for 57% of total gross contracted sales during the period driven by the strong performance of next-generation projects Karmell and The Estates. On the other hand, East Cairo projects, led by SODIC East and Villette, contributed 43% of the period’s gross contracted sales.

Cancellations of EGP 332 million were recorded during 1H 2021, representing 9% of the period’s gross contracted sales. This compares to a cancellation rate of 17% during the same period in 2020.

Net cash collections reached EGP 2.47 billion for the period, with delinquencies at 10%. This compares to collections of EGP 1.85 billion and a delinquency rate of 13% recorded during the same period in 2020.

SODIC delivered some 264 units during the period, of which 141 were in West Cairo projects, while East Cairo and North Coast projects accounted for 113 and 10 of the delivered units respectively. This compares to 256 units delivered during the first six months of the previous year. CAPEX spent on construction during the period amounted to EGP 1.48 billion, compared to EGP 1.58 billion spent during the same period last year.

Financial Review:

Income Statement:

Revenues of EGP 1.87 billion were recorded during the first six months of 2021, representing a 48% increase compared to EGP 1.26 billion recorded during the same period last year. Revenues were mainly driven by deliveries in East Cairo projects which contributed 59% of the period’s delivered value, led by Villette and EDNC which respectively contributed 27% and 20% of the period’s delivered value. Furthermore, West Cairo and North Coast projects contributed 38% and 3% of the delivered value during the six months period respectively.

Gross profit increased 63% YoY on the back of higher revenues to record EGP 652 million, implying a gross profit margin of 35%. This compares to a gross profit of EGP 399 million and a gross profit margin of 32% recorded during the same period in 2020. The improvement in gross profit margins comes on the back of continued margin improvement across SODIC’s projects as the company continues to deliver later phases. Gross margins on East Cairo project Villette improved 1300 bps increasing from 17% in 1H 2020 to 30% in 1H 2021. Gross profit margins on West Cairo project October Plaza, which made up 12% of the period’s delivered value, improved 900 bps, increasing from 21% during the initial deliveries on the project in 1H 2020 to 30% during 1H 2021. 

Operating profit for the six months period amounted to EGP 292 million, reflecting an operating profit margin of 16%. This represents a 169% growth over an operating profit of EGP 108 million and an operating profit margin of 9% recorded during the same period last year. The improvement comes on the back of higher revenues coupled with SG&A to revenues retracting 430 bps during the period compared to 1H 2020.

Net profit after tax and non-controlling interests came in at EGP 223 million, growing 209% from the EGP 72 million recorded during the first half of 2020. Net profit margin improved 600 bps from 6% in 1H 2020, to reach 12% in 1H 2021, on the back of the increase in operating profitability despite the steep drop in net finance income due to the sharp decline in interest rates.

Balance Sheet:

Total cash and cash equivalents amounted to EGP 2 billion. This amount excludes some EGP 1.3 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 0.4x. Bank debts outstanding amounted to EGP 2.4 billion as of 30 June 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 EGP 2.5 billion on 30 June 2021.

Total receivables stood at EGP 15.9 billion, of which EGP 4.4 billion are short term receivables providing strong cash flow visibility for the company. The new presentation of receivables reports a total of EGP 2 billion of on-balance sheet receivables, reflecting only those relating to delivered units already recognized as revenue. On the other hand, some EGP 13.9 billion of receivables related to undelivered units are disclosed in the footnotes. Total backlog of unrecognized revenue stood at EGP 21.7 billion as of 30 June 2021, providing strong revenue visibility for the company. Following the reclassification implemented as of year-end 2020, the company’s 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.