2012 Annual Report 2. Annual Report 2012 Company Developments

Transcription

1 2012 Annual Report 2 Annual Report 2012 Company Developments

2 2012 Annual Report 1 Contents 1. Orascom Development in Key Events About Orascom Development Destinations Map Board and Management Statements Letter to Shareholders CEO s Statement CFO s Comment Business Segments Hotels Real Estate and Construction Destination Management Other Segments Countries Egypt UAE Jordan Oman Switzerland Morocco Montenegro United Kingdom Romania Corporate Governance Group Structure and Significant Shareholders Capital Structure Board of Directors Executive Management Compensation, shareholdings and loans Shareholders participation Changes of control and defense measures External Auditors Information Policy Investor Information Consolidated Financial Statements 2012 Orascom Development Holding AG Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the consolidated financial statements F-3 F-5 F-7 F-8 F Financial Statements 2012 Orascom Development Holding AG Income statement Statutory balance sheet Statement of changes in equity Cash flow statement Notes to the financial statements F-85 F-86 F-87 F-88 F Glossary of Terms 168

3 2 Orascom Development 2012 Annual Report 3 1. Orascom Development in Key Events January April July October El Gouna hosted five soccer camps, promoting the destination as a professional training location for European and local soccer clubs. From 8-13 April El Gouna hosted the international squash open, one of the most important PSA World Tour Events. Salalah Beach becomes an operating destination with the opening of the Juweira Hotel. Ahmed El Shamy appointed new CFO of Orascom Development. Inauguration of the satellite campus of Technische Universität Berlin marks educational milestone for El Gouna. February May August November Several hotels in El Gouna and Taba Heights named in TripAdvisor Travellers` Choice Awards. Signed management agreements with Club Med and Melia to develop a hotel in our destination Chbika, Morocco. Signed management agreement with Swedish company SkiStar to operate the ski arena Andermatt-Sedrun. Completion of core and shell of the first villa in Andermatt, construction work of the first two apartment houses on the Podium is well under way. March June September December Orascom Development celebrated the soft opening of the marina in Jebel Sifah. Opening of the golf driving range in Luštica, Montenegro, with Gary Player being awarded to design the future golf course. Successful sale of 73 apartments ensures completion of The Chedi Andermatt on time. Stuart N. Siegel appointed new Chief Real Estate Officer with more than 25 years of experience in the real estate industry.

4 4 Orascom Development 2012 Annual Report About Orascom Development Orascom Development is a leading developer of fully integrated destinations that include hotels, private villas and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. Orascom Development s diversified portfolio of destinations is spread over multiple jurisdictions such as Egypt, UAE, Jordan, Oman, Switzerland, Morocco, Montenegro, United Kingdom and Romania. Orascom Development has a dual listing, with a primary listing on the SIX Swiss Exchange and a secondary listing on the EGX Egyptian Exchange Sold Real Estate Units ca. 14,000 during the last 15 years Number of Tourists 496,240 in our Destinations in 2012 Five years key financial information Orascom Development Holding AG (numbers in CHF million): Income Statement Revenue Gross Profit % revenue 29% 33% 34% 8% 8% EBITDA (Reported) % revenue 31% 37% 35% -16% -19% Net Profit Jobs created 346 in El Gouna in 2012 Of our hotels are 62% certified with Green Stars Balance Sheet Total Assets 1, , , , ,082.6 PP&E ,003.0 Number of Permanent Residents 22,000 in El Gouna Present in 9 Countries Equity , , , % of total assets 57% 57% 57% 53% 47% Interest-bearing debt % of total assets 23% 21% 24% 26% 29% Net debt Egypt 29.5 Hotels Oman Real Estate and Construction 17.6 United Arab Emirates Revenue Split by Destination Management Revenue Split Business Segment by Country Jordan (CHFm) Other Operations (CHFm) Switzerland Others Cash Flow Statement Operating cash flow⁴ Payments for PP&E Per Share Data (CHF) Earnings per share (EPS) Net asset value per share (NAV) Dividend per share (DPS) Operating Destinations 6 as per end 2012 Number of employees 14,750 as per end 2012 Owner of 29 Hotels Number of Hotel Rooms 6,654 Share Data Nominal value of shares (CHF) Weighted average number of shares outstanding 22,219,128 23,219,317 24,478,213 28,328,422 28,516,898 Number of shares issued 23,219,658 23,219,658 28,213,118 28,543,147 28,543, After non controlling interest 2- Property, Plant & Equipment 3- Shareholder`s Equity before non-controlling interests 4- After interest and taxes 5- Basic and diluted 6- Par value reduction 7- Subject to the decision of the Annual General Meeting on 13 May 2013 Revenues 272 CHF million More than 20 years development experience

5 6 Orascom Development 2012 Annual Report Destinations Map 49.7 million m million m million m million m 2 Egypt U.A.E. Oman Switzerland Operating Destination The Cove Operating destination El Gouna Taba Heights Haram City Developing destination Amoun Island Fayoum Makadi Qena Gardens Operating Destination Jebel Sifah Salalah Beach 1 Developing destination As Sodah Island Destination in the pipeline City Walk, Muscat 2 Developing destination Andermatt Swiss Alps 15.0 million m million m million m million m 2 Morocco Montenegro United Kingdom Romania million m 2 total area 15.5 million m 2 completed 15% completed Developing destination Chbika Developing destination Luštica Development Destination in the pipeline Eco-Bos Destination in the pipeline Constanta Any plot of land, developed or undeveloped, which is under the direct or indirect possession of Orascom Development by virtue of lease, usufruct and/or ownership rights and over which Orascom Development may have further rights to develop, fully own, lease to third parties, sell to third parties, grant sub-usufruct rights to third parties, or otherwise dispose to third parties. Each plot of land is governed by the respective agreement between Orascom Development (directly or indirectly) and the respective governmental entity, shareholders, and/or investors. 1 The discrepancy between the land size of the Salalah Beach project reflected in this year s Annual Report as compared to previous years is due to our earlier reliance on the initial agreement (reflected in the initial master plan) between Orascom Development and the Ministry of Tourism. It was initially agreed that Orascom Development would be granted 25.1 million square meters of land. However, the final arrangement was to grant us the 15.6 million square meters as reflected in the Development Agreement and the final master plan. Orascom Development and the Government of the Sultanate of Oman agreed to later discuss the possibility of acquiring the remaining land to develop a housing project. 2 An understanding has been reached between Orascom Development and the government of Oman in 2007, however no official land has been allocated to Orascom Development yet.

6 8 Orascom Development 2012 Annual Report 9 2. Board and Management Statements 2.1 Letter to Shareholders Dear Shareholders, Samih O. Sawiris Chairman of the Board of Directors Despite the challenging market environment, Orascom Development offers an attractive real estate and hotels mix in unique locations and customers will ultimately reward our offering over time. As I wrote to you last year, Orascom Development started to adapt its business model to counteract the adverse effects of the fragile macroeconomic environment and unstable political situation in the MENA region. During the period under review, we analyzed several options for each of our destinations to embark on a more capital-light growth path. We established encouraging partnerships to expand projects as planned but with less financial commitments from our side and at the same time succeeded to turn some of these partnerships into first visible results. During September, we achieved to sell 73 apartments in The Chedi Andermatt to Acuro Immobilien AG, which secured the completion and opening of the hotel for December this year. In order to further streamline our business and to focus on our core competencies, we decided to divest the tour operations business and signed a sale and purchase agreement in November to sell further stakes in companies operating in this segment. We continuously reviewed our capital expenditures and recurring costs based on achievable cash flows and have identified a portfolio of non-strategic assets which we are going to divest over the next 24 months. Board of Directors At the previous and fourth Annual General Meeting in Altdorf, Switzerland, on May 7, 2012 all members of the Board of Directors, with the exception of Amr Sheta who left Orascom Development to pursue business opportunities outside of the company, stood for reelection and were confirmed in their office for a further year. In light of the results 2012, the Board of Directors will propose to the fifth Annual General Meeting on March 13, 2013 to pay no dividend. Executive Management In order to respond to the changed market environment we strengthened the Executive Management team. Effective July 2012, Ahmed El Shamy who has a track record in private equity in the MENA region was appointed Chief Financial Officer. His predecessor Mahmoud Zuaiter, whose career spans 14 years in the hotel industry, became Chief Hotel Officer. In addition, Stuart Siegel was appointed Chief Real Estate Officer. He has vast experience in the real estate business and served for more than 15 years as President and CEO of Sotheby s International Realty. Furthermore, the Board of Directors appointed Aly Elhitamy as new member of the Executive Management responsible for Egypt. Aly Elhitamy is Orascom Development s Managing Director of Egypt and Chief Construction Officer. The assignment of responsibility to the new members underscores the relevance that they have for our company. The new Executive Management now contains seven members. We believe that the appointments enable us to improve the performance of Orascom Development in the coming years. Significant events after the balance sheet date On March 26, 2013, the Board of Directors decided to improve the capitalization of Orascom Development s Swiss subsidiary Andermatt Swiss Alps (ASA). As a result of the transaction, I will become majority shareholder with a 51% share by converting my loans to Orascom Development into ASA equity, and will act as new Executive Chairman of ASA. Orascom Development remains shareholder with a 49% share. Furthermore, I will invest at least CHF 150 million of new equity or subordinated loans into ASA in order to secure funding of the critical size of the resort in Andermatt until The transaction will release Orascom Development from further capex spending in Andermatt and significantly reduce debt levels. Furthermore I remain firmly committed to fully finance the expected operating cash deficit of Orascom Development of up to CHF 60 million in Outlook for 2013 For 2013, we expect that the political environment will remain unstable in many regions in the Middle East. However, our destinations especially on the Red Sea and in the United Arab Emirates are affected only to a limited extent because of their safety and security. Therefore, tourists from the MENA region and Europe continue to visit our towns in good numbers which enables us to generate free cash flows from these operations. Sales of secondary homes depend on the general economic environment, the location and the funding schemes available. In this regard, the conditions have not changed materially in the last months, but we remain cautiously optimistic regarding real estate sales for In addition, the Board has mandated the management of Orascom Development to put a stronger focus on cost reduction across our destinations and business segments to prepare the company for the future. We believe that Orascom Development offers an attractive mix of real estate in unique locations, and customers will ultimately reward our offering over time. More than once, Orascom Development has proved to be able to adapt to difficult market conditions and to initiate change to undermine its position as a leading town developer. Personally, I am convinced that we can transform the Group to a position of former strength, thereby creating long-term value for both our stakeholders and you, our shareholders. The Board of Directors likes to thank all employees for their contribution and efforts to advance our company in We also like to express a special thanks to our shareholders for their continued support of Orascom Development, as well as to our clients, suppliers and business partners for the trust and confidence they have placed in our company. Samih O. Sawiris Chairman of the Board of Directors

7 10 Orascom Development 2012 Annual Report CEO s Statement Dear Shareholders, Gerhard Niesslein Chief Executive Officer In the year 2012 we advanced the development and funding of our destinations, adopted our business model to focus on capital-light growth and continued to optimize internal structures and processes. The year 2012 was another challenging year for Orascom Development, but we managed to make important steps forward in many business areas. We were able to increase tourist inflows into our destinations by about 10% to almost half a million, managed to raise hotel room rates, continued construction works as planned, and our combined real estate efforts resulted in significantly higher sales than in the year before. Still, we operated another year under adverse market conditions with a restrained European economy and an unstable situation in the MENA region. Against this backdrop we advanced the development and funding of our destinations, adopted our business model to focus on capital-light growth and continued to optimize internal structures and processes. Steady development progress in several destinations Our destinations made significant progress during the last year. A milestone was reached in October 2012 when the Technische Universität Berlin opened its satellite campus in El Gouna. The first branch outside of Germany offers three master studies for sustainable town development and marks an essential milestone of education as well as of sustainable development in Egypt and will support the promotion of El Gouna as a self-sufficient town. In Taba Heights the marina was successfully reopened in September 2012 which allows guests to visit Jordan and the ancient city of Petra, one of the most popular tourist attractions in the region. The reopening is a good example of effective collaboration between Orascom Development and various ministries to support tourism in Egypt and was a turning point in terms of tourist inflows into Taba. After several years of development and construction in Oman, we finally celebrated the opening of the marina in Jebel Sifah. Furthermore the Juweira hotel in Salalah Beach opened its doors during summer In our Swiss destination Andermatt we successfully sold 73 apartments to Acuro, a real estate investment vehicle, while we retained ownership of the Chedi Hotel which will open in December During November 2012, we finished the core and shell of the first villa while construction of the first two apartment houses is well underway. Additionally, we completed the friendly tender offer to the shareholders of the two local ski operators and reached an agreement with the environmental associations to further expand and upgrade the ski arena Andermatt-Sedrun. We expect to start construction for the ski arena already by the end of this year. Increased focus on capital-light growth While our business performance was not satisfactory, we improved the operating cash flow during the period under review, which remains one of the key priorities for At the same time, we plan to further invest into our core destinations in Egypt and Oman. While we remain committed to the Andermatt destination as an important minority shareholder, the Andermatt Swiss Alps transaction releases Orascom Development from further investment obligations. This significant step improves the strategic flexibility of the Group and enables us to focus our resources on our other destinations under development. By engaging in additional relationships with strategic partners, we can access a new range of funding options which we are confident to put in place in the coming years. Strengthened organization Operationally, we became more efficient and effective in the last twelve months as we launched a company-wide re-engineering program named Synchro to adapt our company s structures and processes to the challenging market environment and to increase our overall performance in the mid-term. Part of this exercise was to streamline our business and organization and to make use of synergies and best practices across the group. Based on the outcome of this project, several other initiatives have been launched such as the planned set-up of shared service centers and the alignment of cross functional workflows in project management, planning and design, as well as construction and procurement. The implementation of the established processes will continue this year with company-wide training sessions and other measures to continuously improve our performance. Outlook for 2013 In 2013 we will continue to focus on the advancement and funding of our destinations and further optimization of our internal structures and processes. In this respect, we have no plans to add additional development projects to our portfolio in the near future as our existing land bank offers enough potential for organic growth for the next decade. At the end of 2012, the Group operated 6,654 hotel rooms. This number will increase within the next 12 months through the upcoming hotel openings in Switzerland (The Chedi Andermatt), Oman (Rotana) and Egypt (Makadi near Hurghada on the Red Sea). On behalf of the Executive Management, I like to take the opportunity to thank all our employees for their commitment put forward during the last year. I also like to thank our clients and business partners for their confidence in Orascom Development. Last but not least, let me thank you, our dear shareholders, for the trust you have placed in the Group. Gerhard Niesslein Chief Executive Officer

8 12 Orascom Development 2012 Annual Report CFO s Comment Dear Shareholders, Ahmed El Shamy Chief Financial Officer Operating cash flow improved in 2012, but results were impacted by extraordinary items. In 2013 we will continue to focus on cost savings and monetization efforts. Despite the on-going challenging market environment in the MENA region and the subdued economic situation in Europe, Orascom Development achieved to increase revenues by 7.1% to CHF million, up from CHF million a year ago. The growth in revenues was mainly a result of higher income from the hotel and real estate segment. Gross profit for the period under review improved from CHF 19.7 million (7.7% margin) to CHF 21.3 million (7.8% margin). Extraordinary non cash items such as impairments or transaction losses of CHF 45.1 million and provisions for cancelled real estate sales and doubtful collections of CHF 27.3 million negatively impacted the income statement. Accordingly, the operating result (EBITDA) in 2012 was a negative CHF 52.1 million (2011: CHF 40.0 million loss). When adjusting for the above mentioned extraordinary items EBITDA in 2012 was CHF 20.3 million (7.5% margin) compared to CHF 42.6 million in 2011 (16.8% margin). While group taxes were virtually zero last year, in 2012 some CHF 10.1 million of taxes were charged against the income statement. Combined with higher finance costs this resulted in a net loss after minorities for the period of CHF 97.2 million versus a loss of CHF 69.7 million in Reported versus adjusted EBITDA 2012 (in CHF million) EBITDA reported Extraordinary items Real Estate provisions 20.3 EBITDA Adjusted Balance sheet Total assets on the balance sheet at the end of 2012 were largely unchanged at CHF 2,082.6 million compared to one year ago. The increase in property, plant and equipment (infrastructure, hotels and land belonging to the Group) is mainly due to our development in Switzerland (The Chedi) and Oman (Rotana). The decline in the accounts receivables balance is due to an improved real estate collection process in Egypt and the provision for doubtful debts. Despite ongoing construction works, the inventory increased only slightly. Cash and cash equivalents at the end of the reporting period reached more than CHF 100 million. Borrowings increased by CHF 67.7 million to CHF million due to the use of credit facilities from the group s majority shareholder to finance our construction and development activities. Net debt accordingly was CHF million, compared to CHF million a year ago. After having successfully rescheduled the 2013 and 2014 loan maturities, the group is in discussions with its major creditors to further optimize the funding structure. As a consequence of the reported net loss shareholders equity including non-controlling interests decreased from CHF 1,095.2 million to CHF million. The equity ratio declined from 52.6% to 47.0%, respectively. The ratio of net debt to equity increased from 41.7% a year ago to 51.4%. Operating cash flow improving In 2012 Orascom Development generated an operating cash flow (after interest and taxes) of negative CHF 14.5 million, which was an improvement versus the same period last year. During 2012 we invested CHF million as we continued to develop our destinations in Switzerland and Oman and as we maintained the standard in our Egyptian destinations. For 2013, we expect a capex of around CHF million, excluding discretionary capex, to finish the completion of the Rotana hotel in Oman and for several other smaller projects in Egypt. Further focus on cost savings and monetization programs An important element for 2013 is the implementation of a more capital-light strategy. This is a combination of divestments of nonstrategic assets to strengthen the balance sheet or cooperation with external partners in order to complete and finance entire development phases or certain project elements. Besides working on those monetization efforts, the Group has developed several other strategies to ensure that appropriate and immediate actions are taken during those unstable times and to ensure sufficient funding for our 2013 plans, one of which is the postponement of certain planned capital expenditure investments. On an operational level, we are now focusing on liquidating our inventory of finished or close to be finished real estate units as well as initiating several efficiency and cost saving initiatives that should generate savings in overhead expenses, direct expenses and interest expenses. We expect 2013 to be a tough year, yet we are firm believers that all our efforts in monetization and efficiencies will pay out. We will keep monitoring the events as they unfold at the present and will continue revamping our operations to be more efficient so that they are in the right structure once this cycle reverses. Ahmed El Shamy Chief Financial Officer

9 14 Orascom Development 2012 Annual Report Business Segments 3.1 Hotels Hotel revenues increased by 8.2% due to higher room rates and slightly improved occupancy rates. Accordingly, the operating result (EBITDA) increased to CHF 36.9 million. Hotel revenues CHF 147.6m (2011: CHF 136.3m) Share of Group revenue 54.3% (2011: 53.7%) Hotel market in 2012 The main factors opposing a stronger revival of the hotel market in Northern Africa and in a number of countries in the Middle East were the continued political volatility and a subdued economic situation in key European source markets. In addition tour operators reduced flight capacities impacting occupancy rates. Nevertheless, revenues per available room grew in the North African market by 10% in 2012 and 6% in the Middle East. Financial review 2012 Orascom Development s hotel revenues grew by 8.2% from CHF million a year ago to CHF million in 2012 driven by three main factors: First, our hotel room capacity increased by 1.0% from 6,589 rooms to 6,654 rooms due to the opening of the Juweira Hotel in Salalah Beach (64 rooms) in Oman during Second, occupancy rates in our hotels increased by one percentage point from 56% to 57%. And third we were able to increase our average room rates by 5.3% compared to the prior year. In this context it is worth mentioning that the share of hotels managed by Orascom Development, in contrast to the share of international hotel chains, grew from 7.4% a year ago to 9.1% in While our key source markets remained to be Western Europe (mainly Germany, France, Great Britain and BeNeLux), for the first time business from Egypt became the number one in terms of number of hotel guests and number two in terms of room nights because of shorter stays. As a consequence of the revenue growth, the segment`s operating result (EBITDA) increased from CHF 31.3 million in the prior year (23.0% margin) to CHF 36.9 million (25.0% margin). Country and destination performance varies In our flagship destination El Gouna near Hurghada and in our other hotels on the Red Sea client demand increased as customers started to significantly differentiate between safe tourism areas and larger urban cities. Taba Heights, Egypt, was negatively affected by reduced flight capacities which led to a lower occupancy rate of 47%. In our destination the Cove in UAE, 100 km away from of Dubai, the number of hotel guests increased for the fourth consecutive year and a stellar occupancy rate of 81% was reached despite a 16.0% increase in average room rates. In Jordan occupancy rates reached 44%, slightly below the previous year. At the same time, we managed to stabilize average room rates at the 2011 level. In Oman we celebrated the opening of our second hotel, the Juweira Boutique Hotel in Salalah Beach. As a consequence, the number of hosted tourists in Oman increased compared to last year. Reorganization of Management Team Our hotel management team has been reorganized in the course of 2012 in order to align our businesses closer to customer needs. Mahmoud Zuaiter, former CFO of Orascom Development, was appointed Chief Hotel Officer. In addition, three internationally recognized hospitality experts for the areas Sales & Marketing, Development & Technical Services and Operations were hired. We opened representative offices in Cairo, Muscat, Amman, London, Cologne, Stockholm and Budapest to increase customer relationships. To further increase our public and product awareness, Orascom Development intends to intensify its social media efforts and customer events in the future. Outlook for 2013 The first two months of the current business year registered a slight decrease in revenues compared to the same period of last year. During the next 12 months our hotel portfolio will be expanded with the openings of The Chedi Andermatt in Switzerland (December 2013: 89 rooms), our first hotel in Makadi on the Rea Sea (December 2013: 288 rooms) and the Rotana Hotel in Salalah Beach (expected December 2013: 399 rooms) which should additionally increase revenues. EBITDA CHF 36.9m (2011: CHF 31.3m) Revenues by Countries (% total) 76.9 Egypt UAE Jordan Oman The Hotels segment KPIs, as of 31 December Number of Hotel Rooms 23 Occupancy rate Egypt Russia Germany France Great Britain Belgium ARR (CHF) 1 UAE Netherlands Jordan Israel Others TRevPAR (CHF) 2 Country Destination FY 2011 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 FY 2011 FY 2012 Egypt El Gouna 2,706 2,707 57% 63% Taba Heights 2,365 2,365 54% 47% Others Red Sea % 63% Floating Hotels % 15% UAE The Cove % 81% Jordan Tala Bay % 44% Oman Jebel Sifah % 33% Salalah % ODH Group 6,589 6,654 56% 57% Nationality of hotel guests (% total) 1 ARR: Average Room Rate 2 TRevPAR: Total Revenue Per Available Room is similar to RevPAR but also takes into account other room revenues e.g. food and beverage, entertainment, laundry and other services

10 16 Orascom Development 2012 Annual Report Real Estate and Construction The segment Real Estate and Construction achieved a high level of contracted sales in 2012, while the segment result was affected by several extraordinary items. Real Estate and Construction revenues CHF 76.4m (2011: CHF 67.0m) Real Estate and Construction market in 2012 After several years of high inquiries for second homes in Egypt we witnessed a lower demand from European buyers in In El Gouna for example the share of local buyers accounted for about 80% in 2012 which is about twice as high when compared to last years. We also saw an amount of real estate owners returning their units, however we could retain customers by shifting them towards lower priced units. In construction we completed the first satellite campus of the Technische Universität Berlin in El Gouna and made progress in our Makadi project on the Red Sea. Due to the subdued demand for real estate in Egypt, the construction segment had to further reduce its manpower capacities. In Oman we achieved the same level of real estate sales as last year with two-thirds of our buyers being Omani citizens. Delectably high was the demand in our European destinations such as Switzerland and Montenegro with a regionally diversified buyer`s mix. Financial review 2012 During 2012 Orascom Development sold 791 real estate units for the amount of CHF million compared to 898 units for the amount of CHF million a year ago. The increase of 71.8% in terms of value was also a result of our efforts to strengthen the on-site sales teams to create a more effective international sales partner network. In terms of regional exposure the increase mainly results from higher sales in Switzerland where we successfully sold 73 apartments in The Chedi Andermatt to Acuro and the fact that we started sales in Montenegro. For 2012 the segment Real Estate and Construction increased revenues by 14.1% from CHF 67.0 million to CHF 76.4 million due to higher sales, our efforts to accelerate construction works and deliveries and due to the enhanced collection process. We as well increased the sale of extraworks and upgrades for our sold units which positively affected revenues. Throughout the year however, several extraordinary items impacted our operating results. First, the increase in cost of goods sold particularly in Oman affected segment results. Second, we built provisions in the amount of CHF 27.3 million for cancelled real estate units and doubtful collections in Oman and Egypt. Third, we had to reverse profits from the Iskan transaction in Oman with an amount of CHF 7.4 million. The segment s EBITDA of negative CHF million was a result of the aforementioned extraordinary items. Adjusted for these extraordinary items, EBITDA in 2012 was CHF 23.6 million compared to CHF 27.6 million in Outlook for 2013 During 2012, Stuart Siegel was appointed Chief Real Estate Officer. The main focus for 2013 is to further develop a more flexible local sales strategy that accommodates dynamic market cycles. In addition the real estate segment focuses on expanding its sales distribution channels to reach new markets such as Asia or the Gulf States. At the same time plans are set in place to ensure that our products reflect current market needs by continuing to refine our pricing and offering. Also, there will be more focus on offloading our existing inventory. In Egypt, we will continue to develop programs that focus on incentives for early settlement and will also provide financing programs as well as pay more attention to the secondary resale and rental market. In terms of construction, we will complete the hotel and residential units in Makadi including infrastructure works as well as the Ancient Sands golf course including club house in El Gouna. For Switzerland, we expect a positive impact from the development of the destination s infrastructure, the launch of the Chedi Hotel as well as from the expansion and upgrade of the ski arena. In Montenegro, construction for Luštica Bay will start with ten residential buildings and we will develop an enhanced marketing strategy to raise the value of Luštica Bay as a destination. Real Estate prospects in Oman remain stable in 2013 while markets appear to be slowly recovering. The finishing of sold properties continues and by the middle of the year we expect to complete deliveries. Thereafter the focus will be on selling inventory. No off-plan sales or new construction are planned for this year, while we focus on further developing the Rotana hotel in Salalah Beach for its completion in December. Share of Group revenue 28.1% (2011: 26.4%) Adjusted EBITDA 1 CHF 23.6m (2011: CHF 27.6m) 15.4 Value of contracted sales (CHFm) Excluding provisions and Iskan profit elimination 2 Numbers excluding Haram City and Makadi Egypt Oman Switzerland Montenegro The Real Estate Segment s KPIs, as of 31 December Value of contracted units (CHFm) Contracted Sales by Buyer Nationality (units) 2 Number of contracted units Value of reserved units (CHFm) Dutch American Belgian French Others Number of reserved units Country Destination FY 2011 FY 2012 FY 2011 FY Egypt El Gouna Fayoum Haram City Makadi UAE The Cove Oman Jebel Sifah Salalah Beach Switzerland Andermatt Montenegro Luštica Bay Morocco Chbika Group Total Group (excl. Budget Housing) Swiss Egyptian Omani British Russian Serbian

11 18 Orascom Development 2012 Annual Report Destination Management For 2012 revenues and operating result in Destination Management were slightly below last year. Destination Management revenues CHF 16.5m (2011: CHF 17.7m) Destination Management environment in 2012 The segment Destination Management felt the aftermath of the European debt crisis and political events in the MENA region during In addition, real estate owners spent less and used their properties less frequently than usual. The rising awareness that our destinations have a high level of security standards, however, stimulated demand. Financial review 2012 Revenues in Orascom Development s segment Destination Management slightly decreased to CHF 16.5 million in 2012 (2011: CHF 17.7 million). Around 60% of revenues were generated from utility functions such as water or electricity generation, while the remaining 40% were derived from commercial, urban and community services as well as infrastructure and maintenance activities. The segment reported an operating loss (EBITDA) of CHF 1.7 million in Outlook for 2013 We will continue to strengthen our brand awareness and ensure that guests/ residents experience our life as it should be vision in our destinations. For El Gouna and Taba Heights, it is vital to increase their brand awareness not only in European key markets, but to further address secondary markets such as Turkey, the Ukraine and other CIS countries. Additionally, we will continue to further develop world class services and facilities. For Oman, we will work to enforce Jebel Sifah s positioning as a natural picturesque getaway offering an adventurous experience including hiking, diving, water sports, whale and dolphin watching which is unique in the Middle Eastern region. Similarly, Salalah Beach will be branded as the only exclusive tropical destination in the region. Share of Group revenue 6.1% (2011: 7.0%) EBITDA CHF -1.7m (2011: CHF 0.1m) As Destination Management encompasses every component of the destination s operation such as facility management, security, landscaping, transportation, telecommunications and environmental services, the segment name was changed from Town Management to Destination Management. The segment s composition itself has not been changed. Key events In April the El Gouna International Squash Open, one of the most important tournaments on the PSA World Tour, took place in El Gouna. In October we celebrated the opening of the Technische Universität Berlin satellite campus in El Gouna. The satellite campus offers three master studies for sustainable town development and marks a milestone of education as well as of sustainable development in Egypt and will support the promotion of El Gouna as a selfsufficient town Destination Management Revenues by Destination (% total) 64.2 Haram City El Gouna Taba The Cove Destination Management Revenues by Service Type (% total) 59.9 Utilities Commercial Services Infrastructure & Maintenance Urban Services Community Services Others Egypt`s Prime Minister Dr. Hisham Qandil and Orascom Development s chairman Samih O. Sawiris successfully reopened the marina of our destination Taba Heights. The marina as a revitalising element for our destination allows guests to visit Jordan and the ancient city of Petra, one of the most popular tourist attractions in the region. For Oman the year 2012 was characterized by the opening of the marina in Jebel Sifah and the soft opening of the Juweira Hotel in Salalah Beach.

12 20 Orascom Development 2012 Annual Report Other Segments Land Sales Occasionally, the Group sells land where there are no development obligations or where the Group has developed infrastructure in order to sell the land to third-party developers. This establishes a reference point for the market price of our land bank. Revenues from such sales are included in our Land Sales segment. Revenues from the sale of land, sale of land rights and the associated costs are recognized when land is delivered and the risk of ownership and control has been transferred to the buyer. Other operations The segment Other operations combines those businesses of Orascom Development that are not classified in any of the other business segments. The segment includes activities such as mortgage financing, rental of villas and apartments, hospital and educational services, marina, limousine rentals, laundry and other services. During 2012, revenues of the segment Other operations increased by 2.9% from CHF 30.5 million to CHF 31.4 million, in particular due to our mortgage business (Tamweel) which increased revenues above expectations. Land Sales revenues CHF 0.0m (2011: CHF 2.3m) Other operations revenues CHF 31.4m (2011: CHF 30.5m) Share of Group revenue 0.0% (2011: 0.9%) Share of Group revenue 11.6% (2011: 12.0%) EBITDA CHF -2.4m (2011: CHF -0.9m) EBITDA CHF 15.7m (2011: CHF 5.7m) Note regarding the segment Tour Operations During 2012 Orascom Hotels & Development S.A.E, a subsidiary of the Group entered into shares sale and purchase agreements with Garranah family. Besides reducing the ownership in several investments in associates, the Group sold their remaining subsidiary operating in the tour operations business. Therefore the segment Tour Operations is considered a discontinued operation and is presented accordingly. For further information also see the financial report, footnote 14, 20 and 36.

13 22 Orascom Development 2012 Annual Report Countries Orascom Development Story Over 20 years ago, Orascom Development s founder Samih O. Sawiris had a simple idea to create a little piece of paradise on the exquisitely desolate Red Sea coast. This initial thought evolved over the years and became our principle. Today, Orascom Development develops sustainable holiday destinations and integrated towns offering hotels, residential units, and luxury leisure facilities. We really created and continue to create new communities. Supported by our know-how and market expertise, we are able to spot ideal land plots that can be successfully developed. We assess and evaluate a variety of influencing factors from the ease of accessibility, climate attractiveness, and surrounding cultural attractions to support from the public and the authorities. This procedure is sustainable and allows us to bring value to our land bank step by step. So far, we have successfully implemented this concept in Egypt, Jordan, UAE, and Oman and are further expanding into the Middle East and Europe. With many similarities across our towns, each and every destination has its own identity, comparative edges and as such offers a unique experience. Key Facts million m ,654 9 Total Land bank Operating Hotels 1 Nile Cruise Ship and 16 hotels are managed by international or local hotel management companies Hotel Rooms currently operating Countries of Presence Egypt, United Arab Emirates, Jordan, Oman, Switzerland, Morocco, Montenegro, United Kingdom, Romania Orascom Development s Land Bank Destination Name Total land bank Completed Under construction Under development Undeveloped EGYPT El Gouna Taba Heights Haram City Amoun Island Fayoum Qena Gardens Makadi UNITED ARAB EMIRATES The Cove JORDAN Tala Bay OMAN Jebel Sifah Salalah Beach As Sodah Island City Walk SWITZERLAND Andermatt MOROCCO Chbika MONTENEGRO Luštica UNITED KINGDOM Eco-Bos ROMANIA Constanta Total Percentage of Total Land bank Size 15% 2% 11% 72% 1 The discrepancy between the land size of the Salalah Beach project reflected in this year s Annual Report as compared to previous years is due to our earlier reliance on the initial agreement (reflected in the initial master plan) between Orascom Development and the Ministry of Tourism. It was initially agreed that Orascom Development would be granted 25.1 million square meters of land. However, the final arrangement was to grant us the 15.6 million square meters as reflected in the Development Agreement and the final master plan. Orascom Development and the Government of the Sultanate of Oman agreed to later discuss the possibility of acquiring the remaining land to develop a housing project. 2 An understanding has been reached between Orascom Development and the government of Oman in 2007, however no official land has been allocated to Orascom Development yet. Land categories Definition 6 Operating Towns El Gouna, Taba Heights, and Haram City in Egypt, Jebel Sifah and Salalah Beach in Oman and The Cove in U.A.E. Total Land Bank Completed Under construction Under development Undeveloped Any plot of land, developed or undeveloped, which is under the direct or indirect possession of Orascom Development by virtue of lease, usufruct and/or ownership rights and over which Orascom Development may have further rights to develop, fully own, lease to third parties, sell to third parties, grant sub-usufruct rights to third parties, or otherwise dispose to third parties. Each plot of land is governed by the respective agreement between Orascom Development (directly or indirectly) and the respective governmental entity, shareholders, and/or investors Any plot of land where infrastructure is completed and individual elements of the projects are completed Any plot of land where infrastructure is completed and individual elements of the projects are under construction Any plot of land where infrastructure is under construction but not yet completed Any plot of land with zero infrastructure (raw land)

14 24 Orascom Development 2012 Annual Report 25 EL GOUNA, EGYPT Operating Destination Increased client demand for El Gouna Hotels Spotlight on kite surfing Repeated visits of kite surfing world champions such as Kristin Boese, raised public awareness for El Gouna as a prime location for kite surfing events. The hotel sector improved customer relationships and strengthened its sales approach, driving more business to the town. Occupancy rates increased to 63% in 2012 from 57% in 2011, making El Gouna hotels among the best performing in the Orascom Development portfolio. Opening of satellite campus of Technische Universität Berlin In September, El Gouna achieved a new educational milestone with the inauguration of the Technische Universität Berlin El Gouna Campus. 30 students were enrolled in the first semester. El Gouna International Squash Open Success For the 2nd time El Gouna hosted the International Squash Open. With the world s top 16 players, live international broadcasts, and remarkable audience and viewership, El Gouna made itself a name in hosting international events. New attraction: El Gouna Water Sports Complex covering 90,000 m 2 Opening in summer 2013, El Gouna is preparing to welcome its latest attraction - El Gouna Water Sports Complex, offering water ski and wake board cableways facilities.

15 Key Facts Story 36.9 million m 2 16 Total land stretching along 10 km of beach and spreading across 36 islands and lagoons Hotels 2,707 guest rooms The catalyst and powerhouse behind the growth of Orascom Development s activities - El Gouna - started with a man s search for a perfect spot on the seaside. Over the course of 20 years, the barren spot nourished, demand increased, and the community grew into a fully fledged town. With jobs on offer in the areas of construction, hospitality, service and infrastructure management, El Gouna turned into a microeconomy. Growing the critical mass to over 22,000 permanent residents, El Gouna became an internationally well-known destination. Now El Gouna is a model of a self-sufficient and fully-integrated resort town, illustrating the destination s vision of Life as it should be. 463 Commercial outlets 22,000 Permanent residents Home to some of the world s most reputable brands, El Gouna s facilities include a landing strip, three yacht marinas, an 18-hole championship golf course - and another one under construction, 16 hotels, two spa outlets, a state-of-the-art gym, an international standard hospital, a satellite campus of the Technische Universität Berlin, a field study center of the American University in Cairo, a German-Egyptian hotel school, a nursing institute, and an international K12 School. 2,790 Residential Units sold since 1997 till 31 st of December 2012

16 26 Orascom Development 2012 Annual Report 27 TABA HEIGHts, EGYPT Operating Destination Re-opening of Taba Heights marina TripAdvisor Travellers Choice Awards 2012 In the TripAdvisor Travellers`Choice Awards 2012 several hotels in Taba Heights were awarded. The marina in Taba Heights re-opened in September which increased the attractiveness of the destination among both Jordanian and European tourists. The marina connects Tala Bay in Jordan with Taba Heights in Egypt. Around 30,000 travelers used the marina since it was re-inaugurated. Marketing efforts bear fruit Thanks to new partnerships with German Tour Operators starting in fall 2012, Taba Heights could increase the share of German guests in the destination. Ideal starting point for excursions Taba Heights is the ideal starting point for cultural excursions to the ancient city of Petra in Jordan or St. Catherine s Monastery on the Sinai Peninsula. Jordanian travelers appreciate the ease of accessibility and luxury offered by the Taba Heights hotels. Taba Heights Golf course topranked in the region For another consecutive year in a row Taba Heights Golf course was ranked among the top 5 golf courses in the region by an independent website dedicated to the best golf courses in the world (top100golfcourses).

17 Key Facts Story 4.3 million m 2 6 Total Land private resort built along 5 kilometers of natural beaches Hotels internationally branded with 2,365 guest rooms Taba Heights emerges as a precious jewel in the stunning Sinai Peninsula. Sprawling down a gentle slope framed by mountain ranges and turquoise waters, the integrated upscale resort town boasts breathtaking scenery and a supreme location with a view of four countries: Egypt, Israel, Jordan, and Saudi Arabia. It is an ideal tourist destination featuring six hotels, an uptown village that is home to arts and crafts boutiques, a central square where folklore shows and live music are staged, an 18-hole championship golf course regarded as one of Egypt s most beautiful, the region s first man-made salt cave and a five-star water sports center. 107 Commercial outlets With a fully functioning harbor operating as official port of entry to Egypt, Taba Heights is a popular starting point for excursions to UNESCO World Heritage sites such as the monastery of Saint Catherine, the rose-red city of Petra, the desert of Wadi Rum, the holy city of Jerusalem, and the Dead Sea. 4,000 Permanent residents

18 28 Orascom Development 2012 Annual Report 29 HARAM CITY, EGYPT Operating Destination Another year with more than 500 residential units sold For the 5th consecutive year, Orascom Housing Communities (OHC) sold more than 500 residential units in the low income housing sector. Social Mobility Initiative with World Bank During 2012 OHC worked with the World Bank and the GSF to promote a social mobility concept, focusing on modular expansion of smaller units into larger ones. Guarantee and Subsidy Fund activated Activation of the Guarantee and Subsidy Fund (GSF), a governmental low income housing program providing mortgage subsidies, supported inventory sales. OHC wins Cityscape Egypt award In February OHC was awarded the Residential Project Award for its flagship project Haram City by Cityscape Egypt. This award is the fourth and most recent acknowledgement for OHC s efforts in developing fully integrated cities.

19 Key Facts Story 2.6 million m 2 Total land Launched in 2007 as the first of its kind in Egypt, Haram City s award-winning model of affordable housing within a sustainable and fully integrated township encourages social responsibility and civil engagement. 10,000 Built Residential units 89 Commercial outlets Spanning over approximately 2.6 million square meters of land, the project is now home to more than 30,000 residents. As a truly integrated development, Haram City offers comprehensive community facilities including schools, clinics, worship houses, sporting amenities, a cinema, and 89 commercial outlets. Beyond ensuring the town s self-sustainability through employment opportunities in commercial and industrial sectors, the city hosts various projects designed to stimulate job creation and benefits the overall community as well as underprivileged segments. In order to improve the quality of education of the town students, the Group subsidizes four public schools such as Haram City Language School, making it more affordable for the enrolled students to learn English, German, and Arabic. 30,000 Permanent residents in our community

20 30 Orascom Development 2012 Annual Report 31 AMOUN ISLAND, EGYPT FAYOUM, EGYPT QENA GARDENS, EGYPT Developing Destination Developing Destination Developing Destination Story Orascom Development entered a lease agreement with the Egyptian Government in 2005 to develop the area into an exclusive luxury boutique-style hotel. The project spans over 20,000 m 2 and is located on a spectacular Nile river bank. With 38 luxurious suites featuring private lounges and pools, an exquisite restaurant, lounge bar, wine cellar, and a private library, plans are set to have hotel management agreements with world-renowned Cheval Blanc (Group LVMH). Key Facts Story Story 20,000 m 2 Total Land 38 Planned Luxurious suites In appreciation of its proven development record in 1998 the Egyptian Government awarded Orascom Development a total land area of 1.2 million square meters. Fayoum is located 100 km southwest of Cairo in an ideal location overlooking the spiritual lake of Qarun. Plans are set to develop Fayoum comprising the projects Byoum and Al Roboua in a luxury residential community. Following the success of Haram City, Orascom Housing Communities was allocated 0.8 million m 2 of land in the Qena Governorate, Upper Egypt, in Committed to providing high-quality affordable housing units within sustainable and fully-integrated townships in Egypt, Qena Gardens was master planned to incorporate 8,000 residential units, school, clinics, shopping areas, and an entertainment venue. The master plan for Byoum includes a marina, a 4-star hotel, and 265 residential units, whereas its neighboring sister project, Al Roboua is set to feature 36 stand-alone villas with supporting infrastructure. Key Facts Key Facts 1.2 million m 2 Total Land 0.2 million m 2 Completed Land 1 Planned Hotel A 4-star hotel featuring 62 guestrooms 0.8 million m 2 Total Land 0.07 million m 2 Completed Land 8,000 Planned Units