BACK ON TRACK. Annual Report 2014

Transcription

1 BACK ON TRACK Annual Report 2014

2 4 BACK ON TRACK Orascom Development 2014 Annual Report 5 Contents 1. Strategic Pillars 2. Orascom Development at a Glance 3. Perfomance Overview: Business Segments 2.1 Company Profile 2.2 Destinations Map 2.3 Letter to Shareholders 2.4 CFO s Statement 3.1 Hotels Group s Hotel Portfolio 3.2 Real Estate and Construction 3.3 Destination Management 3.4 Land Sales 3.5 Other Operations Corporate Governance 6. Investor Information 5.1 Group Structure and Significant Shareholders 5.2 Capital Structure 5.3 Board of Directors 5.4 Executive Management 5.5 Employees 5.6 Compensation, shareholdings, and loans 5.7 Shareholders Participation 5.8 Changes of control and defense measures 5.9 External Auditors 5.10 Information Policy Countries 4.1 Egypt 4.2 UAE 4.3 Jordan 4.4 Oman 4.5 Switzerland 4.6 Morocco 4.7 Montenegro 4.8 United Kingdom Consolidated Financial Statements 2014 Orascom Development Holding AG 8. Financial Statements 2014 Orascom Development Holding AG 7.1 Consolidated statement of comprehensive income 7.2 Consolidated statement of financial position 7.3 Consolidated statement of changes in equity 7.4 Consolidated statement of cash flows 7.5 Notes to the consolidated financial statements 8.1 Income statement 8.2 Statutory balance sheet 8.3 Statement of changes in equity 8.4 Cash flow statement 8.5 Notes to the financial statements F-3 F-5 F-7 F-8 F-11 F-89 F-90 F-91 F-92 F Glossary of Terms 190

3 6 Strategic Pillars Orascom Development 2014 Annual Report 7 1. Strategic Pillars Successfully Executed on our 4 Pillar Strategy; Focusing on Growing Core Business & Maximizing Efficiency Cost Cutting & Maximizing Efficiency Growing Core Business & Accelerating Land Development and Monetization Successfully achieved the cost savings target Generated generic savings in the amount of CHF 47.4 million Optimized cost base in proportion to target revenue levels Restructured the organization making it leaner and more efficient through centralization and reducing unneeded SG&A expenses Reduced headcount by approximately 4,000 FTE since year-end 2012 Renegotiated procurement deals and reduced cost of goods sold in the hotels segment 1 3 Real Estate Addressing marketing needs through developing more efficient units & increasing inventory mix to address different market segments Focusing on adding value added amenities that add to the destination s experience and visitor spend Adopted a sub-development model whereby land is developed by third parties under strict development guidelines Hotels Orascom Hotel Management s strategy continued focusing on optimizing the hotels inventory catering to the corporate needs and the Group s market positioning. Starting off from an internal management restructure through a full revamp of the operational developments and sales processes Revisited all hotel management agreements to assess the cost-benefit case by case Developed a yield system to increase early bookings and improve cash flow planning Centralized key functions across destinations and hotels Debt Reduction & Restructuring 2 4 Focus on Value-Adding Investments Successfully ramped up considerable cash reserves to the tune of ca. CHF 100 million CHF 69.9 million was achieved through ODH 15% stake-sale in Orascom Hotels and Development (OHD) CHF 10.7 million was achieved through the sale of 12.5% stake in CMAR; Club Med Mauritius Rescheduled all principal and interest payments on (OHD) for FY 2014 Renegotiating an optimum debt refinancing package Divesting under- performing and non-core assets Succeeded in carving-out our in-house construction segment (Red Sea Construction) and budget housing operations in Egypt (Orascom Housing Communities), saving approximately CHF 8.9 for FY 2014 Sold our 12.5% stake in CMAR, Club Med Hotel in Mauritius, with a total proceed of CHF 10.7 million Continuously reviewing all lines of business to make sure we get the maximum possible value

4 8 Orascom Development at a Glance Orascom Development 2014 Annual Report 9 2. Orascom Development at a Glance ODH develops and manages fully fledged touristic towns

5 10 Orascom Development at a Glance Orascom Development 2014 Annual Report Company Profile Orascom Development is a leading developer of fully integrated destinations, including hotels, private villas and apartments, leisure facilities such as golf courses, marinas and supporting infrastructure. The Group s diversified portfolio of destinations is spread over multiple jurisdictions such as Egypt, UAE, Jordan, Oman, Switzerland, Morocco, Montenegro & United Kingdom. Orascom Development has a dual listing, a primary listing on the SIX Swiss Exchange; and a secondary listing on the EGX Egyptian Exchange. $ One of the largest land banks most diversified land banks under the direct or indirect possession of Orascom Development 3 to 5 Star Hotels to suit different standards Spearheaded by a seasoned Executive Management Team ODH is steered by a top executive management team, with unparalleled expertise in the travel, tourism and real estate sector level One of the largest hotels portfolio 32 Hotels, 17 self-managed & 15 Under Management Loyal Shareholder Base Been with the company for over 6 years The Company Adopts a Unique, Vertically Integrated, Business Model Centered on Transforming Desolate Pieces of Land into Attractive, Self-sufficient, Resort Towns New destination identification acquisition & initial concept Development Phase Operational Phase Support Functions Land Bank Monetization Real Estate Hotel Development Destination Development Master-development Real Estate Owner Services Hotel Operations Destination Operations Controlled Sale of Large Plots of Land to Third Party Developers Management Processes Support Processes Continuous Progress on Strategy Execution Achieved all communicated targets of Awards during 2014 for our hotels in Egypt, Jordan & Oman International Standard Facilities leisure activities, marinas, golf courses, hospitals and schools Dual listing on SIX and EGX More than 25 Years development experience Fully Integrated Town Developers Integrated destinations, offering hotels, residential units and luxury leisure Number of Employees 9,000 approx. 79 % of our hotels in Egypt are certified with Green Stars 8 Operating Destinations other destinations in different stages of development Real Estate Sales of CHF 1.89bn since 1997

6 12 Orascom Development at a Glance Orascom Development 2014 Annual Report Destinations Map The Group s diversified portfolio of destinations is spread over multiple jurisdictions such as Egypt, UAE, Jordan, Oman, Switzerland, Morocco, Montenegro & United Kingdom. Developing Destination Chbika Morocco Destination in the Pipeline Eco-Bos U.K. Operating Destination Andermatt Swiss Alps Switzerland Operating Destinations Jebel Sifah Salalah Beach Developing Destination As Sodah Island Destination in the Pipeline City Walk, Muscat Oman million m 2 total LAND area Egypt Jordan Other Hotels Tala Bay 17.3 million m 2 COMPLETED area 17% completed Operating Destinations El Gouna Taba Heights Haram City Makadi Developing Destinations Fayoum Qena Gardens Amoun Island Other Hotels Royal Azur & Club Azur Zahra Oberoi Montenegro Developing Destination Luštica Bay U.A.E. Operating Destination The Cove

7 14 Orascom Development at a Glance Orascom Development 2014 Annual Report Letter to Shareholders Dear Shareholders, I am pleased to present to you our Annual Report for 2014, an eventful year for Orascom Development Holding (ODH) at the strategic, operating and financial level. As they say The fruits of success always grow on the tree of hard work and the significant turn-around of ODH s bottom line results this year solidifies the hard work, determination and endurance that was undertaken over the very challenging past 3 years. The positive events that Egypt, the Group s largest operating destination and its main source of operating revenues, had witnessed starting the second half of the year 2014 to date, boosted international and domestic confidence in Egypt s stability. With the presidential inauguration in June 2014 and the upcoming parliamentary elections, the road to political reforms became clearer. This stability led the European countries to lift their travel bans on the region which translated into higher occupancy rates in our hotels and had a significant positive impact on our real estate sales. Sales increased by 32.4% compared to last year derived principally from increased sales in our Egyptian destinations (El Gouna & Makadi) and the closing of the bulk sale deal in Salalah beach with an amount of CHF 8.9 million. Furthermore, the sound implementation of our structural reforms, the adoption of the new strategic notion of bringing third-party developers along with the successful execution of our cost savings and monetization programs, all helped in boosting our gross operating profits and have strongly positioned the company to capitalize on its future growth strategy. Positive Development and Operating Performance coupled with New Strategic Initiatives The hotels segment witnessed a noticeable pick-up post the travel-ban lifts in July The Group occupancy rates for the 2H 2014 reached 60% compared to 42% in 2H 2013, taking into consideration that the full capacity of our hotels was not materialized because of the continued travel bans on the Sinai Peninsula area and the heavy floods that hit Taba in May Nevertheless we added a number of new hotels, Azur Makadi Garden Hotel, Red Sea - Egypt (283 rooms) was opened in February; whereas the five-star Rotana Salalah - Oman (399 rooms) started operation at full capacity in August The Group sold 852 real estate units for an amount of CHF 96.4 million compared to 580 units for CHF 72.8 million in 2013 ( this excludes sales coming from Andermatt, Switzerland). Egypt was the biggest contributor to that increase, with the re-launch of Joubal project in October 2014, which I am happy to say that by the end of March 2015, 98% of its units were sold out, in addition to the continued sales progress at Ancient Sands and Makadi. In El Gouna, we have become more innovative with our sales packages, offering attractive payment terms with incentives to encourage early settlement and extending payment terms to drive reservations, particularly during promotional periods. We are also planning to launch two new real estate projects, one during April 2015, under the name of Joubal Lagoons and another mixed-use project towards the end of the year, offering smaller units with lower ticket size. We are also very proud of our sustainability efforts in the destination, whereas, El Gouna was the first city in Africa and the Arab region to receive the Global Green City award in August 2014 sponsored by the United Nations Environment Program. This award is handed to cities displaying substantial measures and efforts in progress within the field of environmental sustainability, especially cities that adhere to a strict environment conservation plan and employ different mechanisms for sustainability and a greener community. In Oman, we delivered 53 units during the period under review, and the closing of the bulk sale deal in Salalah beach with an amount of CHF 8.9 million significantly contributed to the increased sales of the destination. In Montenegro, sales volume continued to witness a healthy momentum and benefitted from significant infrastructure progress with the rapid construction of the Marina and Marina apartments, scheduled to commence delivery to customers during the second quarter of The Group has recently adopted the new strategic notion of entering into sub-development agreements, in a move to accelerate the monetization of its land bank, while providing strict development guidelines, to ensure control over the development and maintain the architectural harmony of the destination. Under this strategic initiative, ODH enters into subdevelopment agreements with third-party developers through the sale of specific land plots where there are no development obligations or where the Group has developed infrastructure in order to sell the land to thirdparty developers. This establishes a reference point for the market price of our land bank and answers earlier concerns raised by the investor and analyst community concerning the value attributed to our undeveloped land. Under this notion, in 2014, Orascom Hotels and Development (OHD), the largest Egyptian subsidiary of the Group has successfully entered into an agreement with El Sewedy; an Egyptian Investor to subdevelop 160,000 m2 in El Gouna for a total value of USD 60 million. On January 4th 2015 and based on the recovery of the Egyptian economy and the increased demand on the investment opportunities in Egypt, Orascom Development successfully completed the sale of a 15% stake of OHD. The offering was oversubscribed 3.8x and generated EGP million (approximately USD 70.7 million, CHF 69.9 million). This transaction marked the return of OHD s active trading on the EGX since Changes in the Board of Directors and Executive Management At the sixth Annual General Meeting on May 12, 2014 all members of the Board of Directors, with the exception of Jean-Gabriel Pérès, stood for reelection and were confirmed in their office for a further year. In addition, Jürg Weber and Jürgen Fischer were elected as new members of the Board of Directors for a one year period. There hasn t been any changes with the core team at the Executive Management level. On the other hand, the Group made some new appointments at the subsidiary levels. New CEOs were appointed for Egypt, Oman and Montenegro, each bringing in professional expertise relevant for each country, to better support the implementation of the Group s growth strategy. Outlook for 2015 With the current positive market conditions in Egypt and the successful restructuring efforts that was done on the Group and subsidiary levels. I believe that we have set the ground for an improved development and sales strategy that will help us achieve our 2015 targets for our Egyptian subsidiary. The shift is now towards stronger growth, with focus on growing core businesses in the different jurisdictions where we have presence. We will work closely on the new strategic notion of accelerating the monetization of our land bank, taking advantage from our diversified portfolio and ultimately increasing revenue streams from Oman, Montenegro and Morocco. Even though we have successfully achieved our cost savings target for the year, we remain committed to further cost optimization and targeted monetization initiatives, making sure that enough cash is available to support the growing business while ensuring the highest returns. On behalf of our Board of Directors and Executive Management, we would like to thank all our employees for their considerable commitment. We also wish to thank our clients and business partners for the excellent working relationship we enjoy with them. I also wish to thank you, our shareholders, for the confidence and trust that you placed in our company. Samih O. Sawiris Chairman of the Board of Directors and Chief Executive Officer

8 16 Orascom Development at a Glance Orascom Development 2014 Annual Report CFO s Statement Dear Shareholders, The Group witnessed a positive turn-around this year strategically and financially. We have successfully executed on our earlier communicated four-pillar strategy, achieved the cost savings target of the year and ramped up cash reserves in the tune of CHF 100 million, which are earmarked to reduce debt and negotiate an optimum debt refinancing package. Net profit attributable to shareholders of the parent company reached of CHF 41.9 million after a loss of CHF million in FY 2013 and EBITDA reached CHF million versus CHF(80.7) million last year. Boosted revenues from ongoing operations Consolidated revenues increased by 13.1% to CHF million (FY 2013: CHF million), on the back of strong real estate & construction revenues, increased hotel occupancy rates during the second half of the year and the increased land revenues resulting from the successful third-party development agreement between Orascom Hotels and Development (OHD); Egyptian subsidiary of the Group and El Sewedy, an Egyptian Investor, to sub-develop a piece of land in El Gouna. The Real Estate and Construction segment witnessed a very strong increase in terms of revenues and sales. Revenues significantly increased to CHF 72.9 million (FY 2013: CHF 49.8 million). The increase was mainly a result of the accelerated deliveries in Egypt (El Gouna, Ancient Sands and Makadi) and Oman, whereby a total of 743 units were delivered during the year. The segment EBITDA increased to CHF 18.9 million compared to CHF (15.1) million in Contracted real estate sales, after adjusting for the exclusion of the budget housing segment, increased by 33% to CHF 87.6 million (FY 2013: CHF 50.2 million), driven by the strong sales momentum in El Gouna & Ancient Sands, which continued to benefit from its safe haven status, in addition to the successful closing of a bulk sale deal of 37 units in Al Fanar project in Salalah Beach, Oman with an amount of CHF 8.9 million. Sales in Montenegro increased by 15% year-on-year and were undoubtedly helped by the very visible construction progress of the Marina and first phase Marina apartments. The hotel segment s revenues were impacted by travel bans on Egypt imposed by several European countries during the end of 2013 and up until July The decline also resulted from the continued travel bans on Sinai and the heavy floods that hit Taba in May Important to note is that all assets and business interruption were fully insured and the majority of the claim has already been collected. Hence, revenue for the year declined to CHF million compared to CHF million last year. Still the segment showed a significant rebound during the second half of 2014, after the travel bans were lifted on the Red Sea area in Egypt promising further progress in Also, the opening of Rotana Hotel in Salalah Beach, Oman which started operating at full capacity in August 2014, postively contributed to the segment s revenue. The segment was able to achieve a positive EBITDA for the 2H 2014 of CHF 23.4 million compared to CHF 4.7 million in the comparable period. Hotels that are directly managed by the Group made the most positive contribution. The land sales revenue this year was one the major contributors to our top and bottom line results. Total segment revenues reached CHF 13.7 million compared to CHF 1.0 million in The high margins associated with this segment also helped in boosting our Gross operating profits to reach 15% versus 3% last year and EBITDA margins to reach 42% versus a negative margin last year. In addition to the enhanced operational activity, the group s bottom line results were impacted by several one-off items that contributed positively to the net profit from continuing operations. We have received gains from amounts that were under settlement with Falcon for Hotels S.A.E after reaching an amicable settlement agreement whereby, Falcon Hotels S.A.E. and its controlling shareholders have recognized the entitlement of Orascom Development, its partners and subsidiaries to receive all revenues from the Cape Citadel Hotel s operations. A five-star hotel with 514 rooms located in Sahl Hasheeh, south of Hurghada. Also and as part of the Group s cost savings and monetization strategy, the Group succeeded in deconsolidating Orascom Housing Communities (OHC) and the construction business, ultimately resulting in a gain in our books, in addition to successful closing of the share-stake sale of CMAR (Club Med Mauritius) hotel. Several other provision-reversals and net foreign exchange gains contributed to the positive results. Operating Cash flow after interest and taxes improved this year to reach CHF (26.2) million compared to CHF (52.2) million. The improvement also came as a result of the rescheduling of interest payments over the period and the reclassification of ASA in Q as an investment in associate. Successful implementation of the cost savings program The Group was able to successfully execute on its cost saving program. The generic cost savings in addition to the carve-out of the budget housing operations and the construction segment, in Egypt in June 2014, contributed positively to the company s cost savings program. As of December 2014, Orascom Development has achieved total generic savings of CHF 47.7 million compared to the cost base FY On track with our debt reduction and restructuring paving the way to a healthier balance sheet One of the main four-pillar strategy of 2014 was the debt reduction and restructuring. Our target was to collect CHF 100 million in cash and use it to reduce the some of the outstanding debt that is sitting on OHD level and waive the financial covenants for the financial year We succeeded in postponing all interest and principal payments for the year and successfully ramped up the needed cash reserves and we did that mainly through 1) the Group 15% share-stake sale in OHD on the Egyptian Stock Exchange which generated approximately CHF 69.9 million, 2) the 12.5% share-stake sale in CMAR generating gross proceeds of CHF 10.7 million and 3) the cash received for the first parcel of land from the land development agreement that OHD entered with El Sewedy; an Egyptian investor to develop 160,000 m 2 in El Gouna, generating CHF 11.5 million. The Group is now using this money and negotiating with all OHD s lenders an optimum debt refinancing package taking into account grace period, pricing, tenor and currency mix. We are also placing our efforts to relief the company from principal payments over the coming 2 years. The Egyptian mortgage subsidiary Tamweel was added back as a subsidiary after being classified as an asset held for sale. The reclassification and the increase in its business activity, resulted in an increase in the total receivables and borrowings of the Group. Focused on value-adding investments Since mid-2013, we have been prudently analysing the Group s business units and investments. The target was to make sure that our efforts, focus and capex were placed in the value adding investments that fall under the core business of the Group and add to its revenue stream. Under this initiative, we took the decision to divest non-core assets that do not primarily fall within our business model of developing-destinations and using the proceeds of which to reduce the overall debt of the Group. furthermore, we deconsolidated subsidiaries that were negatively affecting our operations at the time, namely OHC, the construction arm of the Group and ASA. Outlook for 2015 First quarter of 2015 promises further progress with the hotel Segment s performance. The preliminary occupancy readings in El Gouna & Salalah reached 70% in March. We commenced construction of the Ancient Sands Hotel, in El Gouna, during the third quarter of 2014, a five-star hotel with 56 guestrooms and 120 hotel apartments due to open in Q and have also borken-ground with the construction of Al Fanar hotel in Salalah Beach, Oman following its successful sales launch in August We are also on track with our real estate sales target of CHF million for 2015, whereby we expect the contracted values for Egypt alone in 1Q 2015 to increase from 40-60% over 1Q In terms of land sales revenue, we are due to recognize two more land parcels with a total value of USD 48 million during 1H 2015, from the subdevelopment land agreement that was signed in El Gouna with El Sewedy. In light of the more favorable market environment and after we have successfully executed on our four-pillar strategy by achieving the cost savings target for the year and collecting CHF 100 million in cash from our monetization programs to reduce debt, our emphasis going forward will be on growing the business, generating more opportunities to capitalize on the company s portfolio of hotels, real estate projects & land bank. In parallel, we will also continue pursuing our targeted monetization and cost saving initiatives, ensuring that Orascom Development enjoys flexibility to smoothly adjust to the changing operating environment and still be able to realize business opportunities as they arise. Eskandar Tooma Group Chief Financial Officer

9 18 Business Segments Orascom Development 2014 Annual Report Performance Overview: Business Segments Hotels Real Estate & Construction Destination Management Land Sales Other Operations

10 20 Business Segments Orascom Development 2014 Annual Report Hotels A Challenging Year Hotels in Egypt suffered notable airlift capacity cuts following the travel bans imposed on the country by the majority of the European countries during the end of The flashfloods that hit Taba Heights in May 2014, also had a severe impact on the segment s results, leaving the destination operating at only 37% of its capacity for three full months till the opening of two more hotels, the InterContinental Taba Height - and later Club Med Sinai Bay in December 2014, accordingly 25% of Taba Heights hotel inventory was still out-of-order until December Nonetheless, the incorporation of Orascom Hotel Management (OHM), the Group s hotel asset management subsidiary in early 2014 and the implementation of a hotel focused optimization strategy, limited the magnitude of these challenges to only a 5.6% decrease in total revenues. Revenues declined from CHF million in FY 2013 to CHF million in FY Financial Review 2014 The Recovery during 2H of 2014 Despite the fact that 25% of Taba Heights guestroom inventory remained closed for renovation post the floods through December 2014, OHM set strategies towards optimizing the hotel assets, enforcing the highest standards of efficiency and effectiveness. The applied strategy tackling reformation of the segment s operational, develop mental and sales processes afforded remarkable improvement during 2H 2014 compared to the same period in El Gouna, Red Sea, Egypt: occupancy increased from 46% during 2H 2013 to 64% in the 2H 2014; the Gross Operating Profit per Available Room (GOP PAR) increased during the same period by 240% growing from CHF 5 to CHF 17; the gross operating profit (GOP) margin increased from 13% in 2H 2013 to 30% in 2H Total hotels in Egypt: occupancy increased from 40% in 2H 2013 to 61% in 2H 2014; the GOP PAR grew from CHF 2 in 2H 2013 to CHF 11 in 2H 2014; and the GOP margin grew from 8% in 2H 2013 to 24% in 2H 2014 recording a revenue flow-through of 106%. Total hotels of the Group: occupancy increased from 42% in 2H 2013 to 60% in 2H 2014; and the GOP PAR increased by 100% during the same period. Total revenues during the 2H 2014 reached CHF 70.1 million compared to CHF 53.8 million in 2H 2013, while Adjusted EBITDA increased by 150% over the same period to reach CHF 14.5 million. Organizational and Tactical Reformation OHM started the year with a full restructuring of the segment s organizational structure primarily focusing on the middle management setup. This resulted in a much leaner and more efficient organization and cleared out all duplicated SG&A expenses. Furthermore, new support departments were introduced raising the bar of the operational efficiency reflecting positively on the EBITDA. The new procurement department, handling all development and operation-related purchases and warehouse management, over the course of 10 months afforded a total savings of CHF 0.85 million in Similarly, a new central reservation and yield management units were created to facilitate hotels cross-selling applying a flexible pricing protocol to generate the highest turnover possible. On the tactical reformation level, OHM conducted a full audit of all thirdparty hotel management contracts (65% of our inventory) to ensure fair and satisfactory returns and performance standards in times of crisis and prosperity. Audit resulted in a total annual savings of CHF 2.2 million, which led to OHM taking over the management of four hotels by December A number of actions were also applied to the OHM-managed portfolio of hotels (35% of the Group s inventory). Online sales, which represented 10% of the total business in 2014, was supported by a number of new websites and campaigns that materialized during the 2H 2014 in a 70% increase of online sales compared to the same period last year. Simultaneously, some new markets were penetrated and a number of commitment deals with major European tour operators for a total value of CHF 24.4 million were finalized. These tactics not only sustained cooperation with high-potential business partners, but also ensured steady and reliable flow of business. Product Development and New Openings To boost the average contracted room rate, a refurbishment plan across the Group s hotel portfolio in Egypt was initiated. From the renovation of a number of properties to providing free WIFI at all El Gouna hotels public areas and an IPTV infrastructure setup. The refurbishment plan was partially funded by the tour operator commitment deal returns, with minimal CAPEX pressure on the Group also witnessed a number of new hotel openings. Azur Makadi Garden Hotel, Red Sea - Egypt (283 rooms) was opened in February; whereas the five-star Rotana Salalah - Oman (399 rooms) started operation at full capacity in August. We also introduced a new concept initiative under the name of Hotel Club Concept to the Omani tourism industry by signing the country s first of its kind commitment deal between Rotana Salalah and AlpiTour (Italian tour operator) for a total value of CHF 12.1 million. Outlook for started out positively with January recording a 13% increase in revenues compared to January 2014 despite that 25% of Taba Heights guestroom inventory is still un-operational and travel bans to Taba are still on. In El Gouna and Salalah occupancy already reached the 70% mark as of March We are planning to open 2 new hotels and add a number of rooms to our portfolio during the fourth quarter of In El Gouna, Egypt; the five-star Ancient Sands Hotel is due to open with 56 guestrooms and 120 hotel apartments. In Salalah, Oman, Al Fanar Residence and Hotel will house 300 guestrooms, as for Ras Al Khaimah, UAE, The Cove Rotana Extension will add 150 new rooms to the hotel s inventory. Hotel revenues CHF 118.8m (2013: CHF 125.8m ) Adjusted EBITDA CHF 18.2m (2013: CHF 24.6m) Revenues by Countries (% total) Egypt Oman UAE Jordan The Hotels segment KPIs, as of 31 December Number of Hotel Rooms We will continue to progress on OHM s successfully proven strategy and are already exerting efforts to lift travel bans off Taba Heights. Last but not least, business that is currently being driven to Taba Heights hotels through Aqaba, Jordan, relying on Taba Heights proximity to Tala Bay through Taba Heights Marina allow a positive outlook for 2015 with promising year-end results Share of GROUPS revenue 47.4% (2013: 56.8%) Nationality of hotel guests (% total) Occupancy rate (%) Germany Russia Egypt Netherlands United Kingdom Belgium Poland Switzerland ARR (CHF) Jordan UAE France Unknown Ukraine Israel Others TRevPAR (CHF) Country Destination FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 Egypt El Gouna 2,707 2, Taba Heights 2,365 2, Others Red Sea * 1, Floating Hotels Oman Jebel Sifah Salalah Beach UAE The Cove Jordan Tala Bay ODH Group 7,896 6, * Revenues from Citadel Azur, 5 Star hotel, with 513 rooms were recognized under ODH s hotel segment post the settlement reached with Falcon Hotels S.A.E

11 22 HOTEL PORTFOLIO

12 *** 67 Rooms El Gouna In the heart of the Abu Tig Marina with the most luxurious views and the most convenient accessibility! Famed for its terrace, Ali Pasha s nightly beauty is complemented by the delicacies served at the town s only Indian Restaurant, Tandoor. *** 177 Rooms Arena Inn offers all the amenities and comforts of a holiday resort with a private swimming pool and beautifully designed waterfront restaurant. Hotel guests enjoy access to a full-service beach. *** 50 Rooms Directly overlooking the Abu Tig Marina promenade, minutes away from the beach, the 3-star Captain s Inn is one of El Gouna s most sought after small hotels welcoming divers, kite surfers, and partygoers. Red Sea, Egypt El Gouna, Mer Rouge, Egypte ***** 10 Rooms ***** 268 Rooms **** 54 Rooms **** 434 Rooms A luxury guesthouse directly set on the northern shores of Mangroovy Beach and its kitesurfing stations. A brainchild of an antiques collector, the hotel offers seclusion making it an ideal hideaway for luxury seekers. A stylish Nubian oasis exclusively situated on El Gouna s Championship 18-hole golf course. Complemented by stunning architecture, breathtaking landscapes, sparkling lagoons, the hotel is home to a spa and fitness center for ultimate serenity and rejuvenation. Be it an absolute romantic holiday or a blend of romance and action, this 4-star hotel de charm is the spot. Boasting the most relaxing views of the New Abu Tig Marina coupled with some special treats for an unforgettable romantic holiday, the Adults Only hotel is minutes away from El Gouna s northern beaches and its array of water sports offerings. The 4-star all inclusive resort managed by a family-owned Belgian hotel chain. Offering unparalleled Red Sea holidays for families with children, the resorts unique architectural design is complemented by lush landscaped gardens. ***** 554 Rooms **** 239 Rooms An upscale beachfront resort offering a relaxing atmosphere combined with a lavish selection of on-ground facilities from diving to kitesurfing, world renowned Angsana Spa outlet and a nearby professional 18-hole golf course. A beachfront resort with an all inclusive program. The 4-star hotel is built along a virgin beach expanse of a protected bay. Club-style animation and a myriad of sports activities make it a perfect choice for active families. ***** 339 Rooms **** 66 Rooms An award winning architectural mix of Arabian and Egyptian styles by the internationally renowned Michael Graves. The beachfront resort is built on nine islands surrounded by gardens offering mouthwatering cuisine, private beaches, live entertainment, outdoor heated pool, and water sports. *** 28 Rooms With only 28 guestrooms in the beautiful Abu Tig Marina, Turtle s Inn is one of El Gouna s most sought-after addresses. This modern hotel offers tastefully furnished rooms, refreshing style, and personalized service. Makadi The Cove Sinai, Egypt Ras Al Khaimah Grand Resorts Royal M A K A D I BAY ***** 491 Rooms A charming Adults Only authentic hotel fashioned to reminiscent an Upper Egypt s Mayor s mansion in its most romantic setup. The hotel is complemented by superb interior design, a private lagoon beach and is adjacent to El Gouna s lively Downtown. Located at Makadi Bay, one of Hurghada s fascinating shores, 25km away from Hurghada International Airport, the all Inclusive beachfront resort overlooks its own private sandy beach, offering seven restaurants & bars, a fully equipped water sports center, swimming pools and sports facilities. Club Club M A K A D I BAY **** 339 Rooms Only 25km away from Hurghada International Airport, the beachfront resort is easily accessible housing seven restaurants & bars, a fully equipped water sports center, swimming pools and sports facilities. **** 287 Rooms Ideally located only a few kilometers away from Hurghada, Sahl Hasheesh and Safaga; the Adults Only Azur Makadi Gardens Hotel provides easy access to most of the Red Sea s world-class waterfront destinations with clustered facilities with its sister hotels Royal Azur and Club Azur. **** 69 Rooms **** 234 Rooms The Three Corners Ocean View offers a 4-star all inclusive experience in an Adults-Only environment. The hotel is home to two unique clusters, Le Soleil and Du Port, each offering a unique atmosphere with one overlooking the seafront and the other with fabulous Marina views. **** 115 Rooms Capturing the essence of Egypt with its winding alleys and stunning features, the hotel overlooks El Gouna s lagoons and offers a tropical garden setting in the heart of the town with easy access to the vibrant Tamr Henna Square. Jebel Sifah **** 67 Rooms Designed by renowned Italian designer Alfredo Freda, the Sifawy Boutique Hotel is ideally located only 45 minutes away from the capital of Muscat in the heart of the picturesque marina town. Oman OTHER HOTELS In Egypt Salalah Beach Taba Heights Overlooking the New Abu Tig Marina with direct access to El Gouna s northern beaches, Mosaique Hotel is ideal for sun and adventure seekers. The ultra four-star hotel boasts cool décor, modern flair and amenities tailored to the convenience of its guests. ***** 283 Rooms Located on an idyllic water inlet on the Ras Al Khaimah beachfront overlooking the Arabian Gulf with 600m of pristine beach, the Cove Rotana encompasses a number of Villas that are ideally designed to accommodate families or a group of friends. Sinai, Egypt ***** 385 Rooms ***** 442 Rooms A signature Club Med Resort in the heart of Sinai. The unique Resort is set on a beautifully preserved bay covering 27 hectares, flanked by a 600 yard stretch of private beach. Inspired by traditional Oriental architecture, the Sofitel Taba Heights offers an enchanting atmosphere. Every last one of the Sofitel s guestrooms has a private balcony and garden patio facing the Red Sea. ***** 503 Rooms **** 215 Rooms The perfect business and leisure retreat, consisting of three separate structures linked by tropical garden pathways and resting on a prime waterfront location. The hotel offers 10 restaurants and bars, exclusive entertainment, swimming pools, and a fully equipped health club. Located at the heart of Taba Heights, the four-star El Wekala Golf Resort offers a multitude of activities for the whole family. Across from the hotel the greens of an expertly maintained 18-hole golf course roll softly toward El Wekala s beautiful private beach. ***** 426 Rooms ***** 394 Rooms The award winning architect Michael Graves created the beachfront resort as a paint box of colors and quirky shapes of Egyptian vaults and dome village styled architecture. Home to 3 swimming pools, a saltwater lagoon with its own beach. The resort houses eight restaurants, and a wide array of leisure facilities. The beachfront resort is situated on over 44 acres of lush gardens, 2800sqm of pools and waterfalls with over 500sqm of pristine private beach and houses seven exclusive dining outlets, a private Spa, a Steam Room, Swedish Sauna treatments and Jacuzzi. ***** 27 Rooms Offering the highest standards of hospitality and service, The Oberoi Zahra is described as one of Egypt s most spacious cruise ships with 27 cabins. Recognized by the Egyptian Ministry of Tourism as the Best Cruiser on the River Nile, the Oberoi Zahra is the only Nile Cruiser with a full-service spa. Tala Bay Jordon ***** 514 Rooms Oman An exclusive luxury resort built with natural stones and corals from the region. Located only 30 minutes away from Hurghada International Airport overlooking the Red Sea, this All Inclusive beachfront resort is home to a private harbor, 9 restaurants & bars and guarantees 100% seaview rooms. ***** 399 Rooms **** 260 Rooms An ideal family getaway located in the new resort of Tala Bay on the South Coast of Aqaba. The 4-star hotel offers an array of leisure facilities from outdoor swimming pools to a stateof-the-art fitness and sports center. A newly opened hotel offering a unique holiday experience capitalizing on the Rotana s understanding and hospitality expertise, the upscale hotel s Omaniinspired architecture features a series of clusters surrounding the main building, housing major public facilities and amenities. ***** 105 Rooms Andermatt Swiss Alps Luxurious 5-star contemporary hotel and apartment development set in the exquisite natural beauty of the Swiss Alps. Skiers of all levels and ages will enjoy the slopes reaching up to 3,000 meters above sea level. While the resort s newly conceived ecological 18-hole golf course will delight the avid golfer. **** 82 Rooms Nestled on the picturesque marina promenade of Salalah Beach and facing the Indian Ocean, the hotel offers traditional lifestyle and values. Among the recreational facilities are 2 large swimming pools, a state-of-the-art wellness center and intimate guestrooms.

13 24 Business Segments Orascom Development 2014 Annual Report Real Estate and Construction The Real Estate & Construction segment continued to see an increase in contracted sales, with segment revenues reaching CHF 72.9 million Real Estate and Construction Market in was definitely a positive year for our real estate business segment across all of our destinations. Egypt showed encouraging signs of recovery on the economic and political fronts following the Presidential election in June 2014, this boosted more confidence in Egypt s stability and translated into healthier demand in the first and second home markets. Total contracted sales in Egypt increased by 37% to reach CHF 60.5 million for the FY 2014 compared to CHF 44.3 million last year. The boost came mainly from El Gouna with the successful re-launching of the Joubal project towards the end of the period and from the Ancient Sands project where the first residents moved in during the year. In El Gouna we have become more innovative with our sales packages, offering attractive payment terms with incentives to encourage early settlement and extending payment terms to drive reservations, particularly during promotional periods. Egyptian local buyers constituted around 84% of the total sales in El Gouna, whereas European buyers who had previously made up an important part of our sales, constituted only 14% of the total sales in El Gouna. This came as a result of the travel bans that were issued up until July 2014 coupled with a weaker Euro and Sterling against the US Dollar. Oman and Montenegro continued to witness positive progress in the value of contracted sales, reaching CHF 36.0 million compared to CHF 29.0 million last year. In Oman, following the successful launch of the Al Fanar project in Salalah, we were able to complete a bulk-deal sale of 37 units to a Swedish investor, and we continue to focus on selling our built-up inventory. We also delivered 53 units during the period under review. Contracted sales during the period rose to CHF 13.9 million representing 46 units compared to 21 units last year. Montenegro continued its positive sales momentum this year, with the value of contracted sales rising by 15% to CHF 22 million during FY 2014 compared to CHF 19 million last year. Particularly pleasing was the first sales of large villas during the period which achieved sums in excess of Euro 2 million and proved that demand at the very top end exists in this spectacular project. Sales were undoubtedly helped by the very visible construction progress of the first phase Marina apartments and the Marina itself. Apart from the normal construction activities associated with our off plan sales, noticeable achievements in 2014 included the completion of the 283 room, four star, Makadi Hotel Gardens Azur in Makadi, Egypt and the 399 room, five star, Rotana Hotel in Salalah, Oman, both of which were completed during the first quarter of In El Gouna, we commenced construction of the Ancient Sands Hotel during the third quarter of 2014 and in Oman, we broke ground in the fourth quarter of 2014, with the construction of the Al Fanar hotel in Salalah, following its successful sales launch in August. In Montenegro, rapid progress was made on the new Marina project and the first phase of the 71 residential units which are expected to be delivered during the second quarter of 2015 with the first residents expected to move in the summer. Financial Review 2014 During 2014, real estate and construction revenues increased by 46.4% to reach CHF 72.9 million vs. CHF 49.8 million in FY This increase is attributed to the accelerated construction activity leading to an increase in the unit-deliveries for our projects in Egypt (El Gouna and Makadi) and in Oman. Accordingly the segment s adjusted EBITDA reached CHF 20.3 million compared to CHF 3.0 million in Orascom Development sold 852 real estate units for an amount of CHF 96.4 million compared to 580 units for CHF 72.8 million on 2013 ( this excludes sales coming from Andermatt, Switzerland). Also noteworthy was that the Group succeeded in decreasing the value of cancelled units for all its destinations during the year 2014 by almost 49% in terms of value compared to last year. In addition, we reduced the value of completed units from CHF 21 million in 2013 to CHF 18.5 million in 2014, mainly as a result of the efforts exerted with the sale of built inventory in El Gouna. Outlook for 2015 Following the positive pick up in Egypt during the second half of 2014, along with a restructuring of the real estate department in Orascom Hotels and Development (OHD), we believe that we have set the ground for an improved development and sales strategy that will help us achieve our sales target for In El Gouna, we are planning to have two new project launches during the year to appeal to a wider audience. For those projects, we are developing more efficient units; diversifying the inventory mix to address different market segments. Units that are smaller in size and accordingly more affordable to the younger generation, accompanied by more flexible payment terms. We are also accelerating our land development and monetization by adapting a new master development model, whereby land is developed by third parties under strict development guidelines to coincide with El Gouna s harmonious appeal. We already succeeded in signing a sub development agreement with a third-party investor, to sub develop 160,000 m 2 of land adjacent to the New Marina. In Oman, we expect further progress on the Al Fanar project with focus also remaining firmly on selling our built-up inventory. In Montenegro, we are redesigning some of the aspects of our first phase Marina Apartments to better adapt the product to market demand. Sales should continue to benefit from the new planned project launches, the rapid construction progress and our first residents who should be moving in during the summer of We are also planning to introduce a new rental management program in all of our destinations, adding to our products appeal so that buyers can also see an additional benefit from their purchase. The bulk - deal that we did in the Al Fanar project in Oman was the first example of this initiative, we expect to launch similar products elsewhere offering buyers a hands off managed rental investment product, producing attractive yields whilst at the same time creating residual income from the management of these projects. Real Estate and Construction revenues CHF 72.9 m (2013: CHF 49.8 m) Adjusted EBITDA CHF 20.3m (2013: CHF 3.0m) Value of contracted sales (CHF m) Egypt Oman Montenegro Contracted Sales by Buyer Nationality (% total) The Real Estate and Construction segment KPIs, as of 31 December Value of contracted units (CHF m) Share of GROUPS revenue 29.1% (2013: 22.5%) 56 Number of contracted units Egyptian Swedish Russian Swiss British Belgian Montenegro German Serbia French American Lebanese Danish Average Selling Price (CHF/sqm) Country Destination w FY 2014 FY 2013 FY 2014 FY 2013 FY 2014 FY 2013 Egypt El Gouna ,497 2,536 Fayoum Haram City Makadi Oman Jebel Sifah ,857 2,412 Salalah Beach ,042 2,426 UAE The Cove Montenegro Lustica Bay ,390 4,335 ODH Group ,425 1,452 ODH ex Budget Housing ,625 2,519 Numbers net of cancellations: ODH Group ODH ex Budget Housing

14 26 Business Segments Orascom Development 2014 Annual Report Destination Management The Segment reports a slight decrease in revenues compared to last year Destination Management Environment in 2014 The early signs of political and economic reforms, coupled by the ongoing secure image of El Gouna, has resulted in a boost in the number of visitors this year on both fronts, the hotel guests and property home owners. The launch of the 399-room, Rotana hotel in Salalah Beach Oman, has helped increase life to the destination and helped in the closing of a bulk real estate sale deal of 37 units. While the development of Lustica Bay, Montenegro, continued to meet its construction targets in This rapid progress on the ground helped in increasing awareness of the destination, giving people a preview and a real sense of what Lustica Bay is becoming in the near future. Financial Review 2014 Revenues in Orascom Development s segment Destination Management slightly decreased to CHF 13.4 million in 2014 (2013: CHF 14.6 million). Around 40% of revenues were generated from utility functions such as water or electricity generation, while the remaining 60% were derived from commercial, urban and community services as well as infrastructure and maintenance activities. The segment reported adjusted EBITDA losses of CHF 2.1 million in 2014 compared to a loss of CHF 0.6 million in Key events El Gouna City has received the Global Green Town award in August 2014 sponsored by the United Nations Environment Program. This award is handed to cities displaying substantial measures and efforts in progress within the field of environmental sustainability, especially cities that adhere to a strict environment conservation plan and employ different mechanisms for sustainability and a greener community. El Gouna is the first city to receive this award locally as well as the first in Africa and the Arab Region. The Squash Championship; was held for the second time in April In October 2014, we launched Joubal; a new real estate project offering a mix of villas and apartments and we were successfully able to sell 54% of the project within 3 months after the launch date. In May 2014, Taba Heights witnessed one of the worst floods in the region s recent history. We had to shut-down all of our six hotels and several outlets for repairs and renovations. We succeeded to re-operate 75% of the town s guestrooms post the flash floods with the continuation & reopening of three hotels (Sofitel Taba Heights, Miramar Resort Taba Heights & the Inter Continental in June 2014 and reopening of the fourth hotel (Club Med Sinai Bay) in December Orascom Development took over the management of TTC El Wekala Golf Resort and Marriott Taba Heights reintroducing them as El Wekala Golf Resort and the Bayview Resort Taba Heights respectively. The Taba Heights Golf course was among several of the town s facilities that were damaged by the floods. The Golf Club was reopened in October 2014, allowing golfers to make the most of their holidays at one of the resorts most attractive locations. The back nine holes of the golf course are currently in use and all the practice facilities, including the driving range, the putting green and the short game area are fully operational. Taba Heights water sports provider, Water-World, has partially re-opened and currently offers snorkeling trips, parasailing and semi submarine trips to explore the shores and under water wonders of the Red Sea. In December 2014, we celebrated the opening of Sands managed Casino in Miramar Hotel as the destination s first gaming center adding a new entertainment edge to the town. In Salalah Beach, Oman, the five stars, 399 rooms Rotana hotel-resort was opened in March 2014, to be the biggest hotel in the destination and we started the construction on the third hotel Al Fanar during the fourth quarter of 2014, planning to hold 300 rooms. This year also witnessed the arrival of the first Italian charter to Salalah Beach in collaboration with Alpi Tour. We also successfully handed over 33 villas and apartments and opened the first Extra Divers diving center. In Jebel Sifah, Oman, The floating fuel station was opened on the marina, 21 apartment and villas were handed over to the clients. Infrastructure including water, plumping, IT, fire, electrical and landscape was completed on the different villas and the main resort boulevard. Extra Divers diving center was also opened in the destination post the completion of Sifawy s beach. Sablat Al Sifah ; as a CSR initiative was launched during the year, to support local women to help them establish business selling traditional food, traditional handicrafts and providing services in bride and bridegroom preparation. Interest in Lustica Bay, Montenegro, has continued to flourish and the project has been delighted to welcome a host of global buyers. Construction works of the first ten apartment buildings that was activated in 2013 has continued as planned with buildings reaching their final stages of completion by the end of The second group of eight apartment buildings has also already been activated and started the detailed design process in The marina construction has moved forward and we have seen the completion of the main breakwater structure and the commencement of various other structural elements. Outlook for 2015 In Egypt, specifically in El Gouna, we will continue to strengthen our brand awareness and ensure that guests/residents experience our life as it should be vision in our destinations. We are also working on accelerating the monetization of our land bank by continuously identifying new sub-development agreements to add to the value of our land and promote healthy competition within our developments. We are also planning to launch two new real estate projects, one during April 2015, under the name of Joubal Lagoons, as an extension to the newly launched Joubal project, after the huge demand on its units and successful sales generation. We are looking into diversifying the inventory mix of El Gouna by launching a new project towards the end of the year, offering smaller units with lower ticket size and flexible payment terms. A new water station is being constructed in addition to the studying of the development of a solar power plant facility. For Oman, we will continue our focus on new real estate sales, we are also planning to deliver 44 units in Sifah and Salalah Beach. We started the construction of the Al Fanar hotel in Salalah Beach, to hold 300 hotels rooms with plans to open during the end of We will also start with Destination Management revenues CHF 13.4m (2013: CHF 14.6m ) Share of GROUPS revenue 5.4% (2013: 6.6%) Adjusted EBITDA CHF (2.1) m (2013: CHF (0.6) m ) Destination Management Revenues by Destination (% total) 75.4 El Gouna Haram City Taba Oman The Cove the mobilization period in As Sodah Island during For Montenegro, following the increased momentum of the previous years, Lustica Bay has again committed to maintain this development momentum. Sales and marketing initiatives will be expanded to reach out to new markets, and Lustica Bay should welcome its first group of homeowners in The New Year will also see the construction kickoff for the next group of apartment buildings and the first cluster of villas. Lustica Bay has also committed to break ground on the development s first hotel by the end of The marina and other infrastructure development will continue as planned. Destination Management Revenues by Service Type (% total) Utilities Commercial Services Infrastructure & Maintenance Urban Services Community Services Others