SODIC Releases 9M21 Results; Gross Sales up 32% To a Record EGP 5.4 Billion

Sixth of October Development & Investment Company “SODIC” has released its consolidated financial results for the period ending 30th of September 2021.

• Gross contracted sales: EGP 5.39 billion, up 32% YoY; 
• Cancellations: 16% of gross contracted sales;
• Cash collections: EGP 3.64 billion;
• Timely delivery: of 570 units; 
• Revenues: EGP 3.31 billion;
• Gross profit: EGP 1.05 billion, recording a gross profit margin of 32%; 
• Operating profit: EGP 469 million, implying an operating profit margin of 14%
• Net profit after tax and non-controlling interests: EGP 342 million, delivering a net profit margin of 10%.

9M21 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, generating some EGP 2.74 billion in gross contracted sales during October 2021; 
• October 14th 2021, SODIC signed EGP 1.57 billion Long-Term Syndicated Facility to finance flagship development SODIC West.

Operational Review; 

SODIC sold 817 units during the nine month period, generating gross contracted sales of EGP 5.39 billion, an increase of 32% over EGP 4.1 billion of gross contracted sales during the same period in 2020. 

West Cairo accounted for 51% of gross contracted sales during the first nine months of 2021, driven by the continued strong performance of the company’s signature project The Estates, which contributed 23% of the period’s gross contracted sales. 

On the other hand, East Cairo projects contributed 49% of the period’s gross contracted sales, on the back of the sharp increase in sales on SODIC East which accounted for 25% of gross contracted sales during the period. 

Cancellations of EGP 869 million were recorded during the first nine months of 2021, representing 16% of the period’s gross contracted sales. This compares to a cancellation rate of 20% during the same period in 2020. 

The increase in cancellations is mainly attributable to cancellations on the 500 acre project due to the temporary suspension of the project, with the project accounting for EGP 478 million of cancellations during the period. 

Excluding cancellations on the 500 acres, cancellations during the period would represent 7% of gross contracted sales. It is worth noting that while cancellations on the 500 acre project negatively impacted the cancellation rate for the period, the 9M total project cancellation of EGP 478 million amount to 8% of the project’s gross contracted sales since its launch. 

SODIC attributes this to its strong credibility and solid reputation as well as the company’s diligent management of these new developments and timely transparent communication with the project’s clients.

Net cash collections reached EGP 3.64 billion for the period, with delinquencies at 9%. This compares to collections of EGP 3.1 billion and a delinquency rate of 9% recorded during the same period in 2020. 

SODIC delivered some 570 units during the period, of which 225 were in West Cairo projects, while East Cairo and North Coast projects accounted for 328 and 17 of the delivered units, respectively. 

This compares to 786 units delivered during the first nine months of the previous year. It is worth noting that the company’s 2021 deliveries plan is heavily skewed towards the fourth quarter of the year compared to previous years, with the company delivering an additional 161 units in October 2021. 

Throughout the period, the company started delivery on a number of projects, notably residential project Six West and commercial project Polygon X in the company’s flagship destination SODIC West in West Cairo, 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 on the east side. 

While the number of delivered units declined slightly in 2021 compared to 2020, the average value of delivered units increased some 31% YoY to reach EGP 5 million. CAPEX spent on construction during the period amounted to EGP 2.1 billion, compared to EGP 2.4 billion spent during the same period last year, with the YoY decline in CAPEX spent mainly attributable to the rollover of planned CAPEX on the 500 acre project.

Financial Review;

Revenues of EGP 3.31 billion were recorded during the first nine months of 2021, an 8% decline compared to EGP 3.58 billion recorded during the same period last year as a result of the lower deliveries with the majority of 2021 unit handovers being scheduled for the fourth quarter of the year. Revenues during the period were mainly driven by deliveries in East Cairo projects which contributed 65% of the period’s delivered value, led by Eastown Residences and Villette, which contributed 23% and 22% of the delivered value, respectively. Furthermore, West Cairo and North Coast projects contributed 33% and 2% of the delivered value during the period, respectively.

Gross profit reached EGP 1.05 billion, implying a gross profit margin of 32%. This compares to a gross profit of EGP 1.16 billion and a gross profit margin of 32% recorded during the same period in 2020.

Operating profit for the nine month period amounted to EGP 469 million, reflecting an operating profit margin of 14%, compared to EGP 697 million of operating profit and an operating profit margin of 19% recorded during the same period last year.

Net profit after tax and non-controlling interests came in at EGP 342 million, delivering a net profit margin of 10%, which compares to EGP 545 million and a net profit margin of 15% recorded during the first nine months of 2020.

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 year-end 2020.

Bank leverage remains low, with bank debt to equity standing at 0.4x. Bank debt outstanding amounted to EGP 2.48 billion as of 30 September 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 billion on 30 September 2021.

Total receivables stood at EGP 15.7 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 1.9 billion of on-balance sheet receivables, reflecting only those relating to delivered units already recognized as revenue. On the other hand, some EGP 13.8 billion of receivables related to undelivered units are disclosed in the footnotes. Total backlog of unrecognized revenue stood at EGP 21.6 billion as of 30 September 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. 

2021 Outlook

With the strong performance of the company’s long awaited North Coast project “June” launched in October 2021, SODIC is on track to surpass sales guidance. Deliveries remain as scheduled to close the year with the forecasted growth in deliveries and consequently revenues, meeting disclosed guidance despite some delays on planned CAPEX on some of the projects. 

“We expect to close a new record year despite the developments on our 500 acre project which has led us to halt sales on one of our key projects in West Cairo. We expect to resume sales next year once the new adjusted master-plan of the project in approved. The unprecedented success of June has put us in a good position to close another successful year with solid growth.” Commented Magued Sherif SODIC’s Managing Director.