SODIC Releases 1Q21 Results; Strong Growth Across Operational And Financial KPIs; A New Q1 Record Of EGP1.85 Billion Of Gross Contracted Sales

Sixth of October Development & Investment Company “SODIC” has released its consolidated financial results for the three months ended 31st of March 2021.

1Q 2021 Operational & Financial Highlights

• Gross contracted sales: EGP 1.85 billion, up 114% YoY
• Residential sales: EGP 1.83 billion of gross contracted sales, up 117% YoY
• Cancellations: 8% of gross contracted sales
• Net Cash collections: EGP 1.23 billion
• Timely delivery: of 120 units
• Revenues: EGP 849 million, up 60% YoY
• Gross profit: EGP 282 million, recording a gross profit margin of 33% 
• Operating profit: EGP 129 million, reflecting an operating profit margin of 15%
• Net profit after tax and non-controlling interests: EGP 100 million, delivering a net profit margin of 12%

Operational Review; A new Q1 record of EGP 1.85 billion of gross contracted sales

Gross contracted sales for the quarter recorded EGP 1.85 billion, representing 333 units sold, mainly generated from residential sales; an increase of 114% over EGP 865 million, representing 205 units for the first quarter of 2020. 

SODIC’s newest West Cairo project Karmell had the most significant contribution to gross contracted sales, generating 35% of the quarter’s sales. Other West Cairo projects contributed a further 27%, mainly driven by the strong performance of SODIC’s signature project, The Estates. East Cairo projects, led by SODIC East and Villette, represented 38% of gross contracted sales during the quarter.

Cancellations of EGP 147 million were recorded during Q1 2021, representing 8% of the quarter’s gross contracted sales. This compares to a cancellation rate of 22% during the first quarter of 2020.

Net cash collections reached EGP 1.23 billion for the period, with delinquencies at 10.9%. This compares to collections of EGP 986 million and a delinquency rate of 11.2% recorded during the same period in 2020.

SODIC delivered some 120 units during the first quarter of the year. East Cairo projects, namely Eastown Residences and Villette, accounted for 60 of the delivered units, while West Cairo and North Coast projects accounted for 52 and 8 of total deliveries respectively. This compares to 100 units delivered across all projects during Q1 2020.

CAPEX spent on construction during the first quarter amounted to EGP 776 million, compared to EGP 950 million spent during the same quarter last year.

Financial Review; growth in revenues & profitability supported by deliveries & margin improvement on Villette 

Income Statement

Revenues of EGP 849 million were recorded during the quarter, an increase of 60% over EGP 529 million recorded during the first quarter last year. Revenues were driven by deliveries in East Cairo projects which contributed to 59% of the quarter’s delivered value, led by Villette which contributed 47%, while West Cairo and North Coast projects accounted for a further 36% and 5% respectively.

Gross profit increased 69% YoY on the back of higher revenues to record EGP 282 million, implying a gross profit margin of 33%. This compares to a gross profit of EGP 167 million and a gross profit margin of 32% recorded during the same quarter of 2020. The improvement in gross profit margins comes on the back of continued margin improvement of East Cairo project Villette, which accounted for the lion’s share of the quarter’s delivered value, with margins on the project improving 1,600 bps to 28% during the reporting period compared to 12% during 1Q 2020. 

Operating profit grew 219% over 1Q 2020 to reach EGP 129 million, reflecting an operating profit margin of 15%. This compares to EGP 40 million and an operating profit margin of 8% recorded during the first quarter last year. The significant improvement comes on the back of higher revenues coupled with SG&A to revenues retracting 600 bps during the quarter.

Net profit after tax and non-controlling interests came in at EGP 100 million, growing 235% YoY from EGP 30 million recorded during 1Q 2020. Net profit margins improved 600 bps from 6% in 1Q 2020, recording 12% in 1Q 2021, on the back of the increase in operating profitability. However, it was negatively impacted by a steep drop in net finance income as a result of the sharp decline in interest rates following CBE rate cuts during 2020. 

Balance Sheet

Total cash and cash equivalents amounted to EGP 2.4 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 the 31st December 2020.

Bank leverage remains low, with bank debt to equity at 0.38x. Bank debts outstanding recorded EGP 2.4 billion as of 31 March 2021. SODIC has been gradually increasing leverage mainly to finance investment in recurring income assets, debt to equity recorded 0.37x on 31 December 2020, with EGP 2.3 billion outstanding.

SODIC continues to invest in 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 2.4 billion on 31 March 2020.

Total receivables stood at EGP 16.3 billion, of which EGP 4.6 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; in addition, some EGP 14.3 bn of receivables related to undelivered units are disclosed in the footnotes.

Total backlog of unrecognized revenue stood at EGP 21.8 billion as of 31 March 2021, providing strong revenue visibility for the company. Following the reclassification implemented as of year-end 2020, backlog can be estimated as the sum of the advances from customers account and the off-balance sheet post-dated checks related to undelivered units.

Commenting on the results Magued Sherif SODIC’s Managing Director said “We are pleased and excited to deliver an excellent set of results for the first quarter of the year, putting us on track to achieve our annual guidance. The strong momentum of last year’s fourth quarter was carried over, helping us deliver the best first quarter on record for gross contracted sales. Construction and deliveries are ongoing across our projects, supporting our commitment to timely deliveries. We continue to invest in our portfolio of prime assets to deliver on our strategy to create sizable future recurring revenues for the company.”