Madinet Masr Reports robust growth for H1 2023

Madinet Masr delivers robust growth and doubles its net profit in the first half of the year as new unit sales soar، driven by new project launches and expansions.

Madinet Masr، one of Egypt’s leading urban community developers، announced on 9 August 2023 its standalone financial results for the six-month period ended 30 June 2023 (H1 2023)، reporting a net profit of EGP 584.7 million on total revenue of EGP 2،199.6 million. The Company reported a net profit of EGP 280.3 million for the quarter ended 30 June 2023 (Q2 2023)، booking a top line of EGP 1،184.4 million.

According to Abdallah Sallam،
Chief Executive Officer:
"As we conclude the first half of 2023، we are pleased to present another set of solid financial and operational results، which has seen us continue to build on an impressive start of the year to deliver further growth.

Amidst macroeconomic instability and inflationary pressures، the Egyptian real estate market continues to demonstrate its resilience. Coupled with the unwavering dedication of our talented team، our strategic vision، and our Company’s fundamentals، Madinet Masr has successfully managed to carry over its growth momentum from the first quarter to deliver exceptional results.

During the first half of 2023، we focused on driving sales and revenue growth through the successful launch of new projects and phases across our developments. Madinet Masr gross contracted sales reached EGP 5،298.3 million، in addition to EGP 1.45 billion at Minka and EgyCan، which led to strong financial results that align with our targets. Consequently، our revenue soared to EGP 2،199.6 million، marking a 22.8% y-o-y increase، while net profit more than doubled year-on-year to EGP 584.7 million.

As part of our nationwide expansion plan، we successfully launched Zahw in West Assiut in June 2023. This marks a significant milestone in our commitment to bring our vision of innovative urban development to communities beyond Cairo. Our team is dedicated to delivering quality real estate offerings that meet the evolving needs and preferences of our customers across the country to ensure we remain at the forefront of the Egyptian real estate market.

Looking forward، we are excited about the potential that lies ahead and are confident in our ability to navigate challenges while capitalizing on opportunities. Madinet Masr is well-poised to harness cutting-edge technology and deliver unparalleled experiences to homeowners.

Madinet Masr recorded gross

contracted sales of EGP 5،298.3 million during H1 2023، up by 54.6% y-o-y from EGP 3،427.6 million in H1 2022. Approximately 63.9% (EGP 3،383.5 million) of Madinet Masr’s gross contracted sales for H1 2023 were recorded at Taj City، the Company’s 3.6-million-sqm mixed-use development in the eastern suburbs of Cairo. Meanwhile، 36.0% (EGP 1،909.9 million) of Madinet Masr’s gross contracted sales for H1 2023 were generated at Sarai، a 5.5-million-sqm mixed-use project near the New Administrative Capital on the Cairo-Suez Road.
The Company sold a total of 1،055 units in H1 2023، down 8.4% y-o-y from 1،152 units in H1 2022. Madinet Masr sold 706 units at Taj City during the six-month period (H1 2022: 517) and 345 units at Sarai (H1 2022: 635). The first half of the year saw the launch of Rai in Sarai in January، with the first phase introducing S-villas and town houses. This was followed by the launch of Elan in Sarai in May، a 356،000 square meter mix-used development. In June، the Company launched Phase 3 of Club Side in Taj City، a 131.5 thousand-sqm development with lofts، apartments and duplexes. As at 30 June 2023، Madinet Masr’s sales reached EGP 1.1 billion in Rai، EGP 386 million in Elan and EGP 200 million in Phase 3 of Club Side.
On a quarterly basis، the Company booked gross contracted sales of EGP 3،505.5 million for Q2 2023، an increase of 90.7% y-o-y from the EGP 1،838.0 booked in Q2 2022. Taj City accounted for 61.1% (EGP 2،142.7 million) of the quarter’s gross contracted sales، while Sarai accounted for 38.8% (EGP 1،360.5 million). Madinet Masr sold a total of 722 units during Q2 2023، up by 23.0% from the same quarter of the previous year. Taj City sold 463 units in Q2 2023 (Q2 2022: 270)، while 257 units were sold at Sarai (Q2 2022: 317).

Cash Collections

Madinet Masr made cash collections of EGP 1،954.9 million for H1 2023، up by 19.6% from the figure of EGP 1،634.0 million collected in H1 2022. The Company recorded a cumulative delinquency rate of 2.5% at the end of H1 2023، down from the rate of 4.4% reported for H1 2022. The decline in the delinquency rate reflects routine efforts to purge the Company’s receivables portfolio of nonperforming contracts.

Cash collections amounted to EGP 1،066.8 million in Q2 2023، an increase of 33.7% y-o-y against the EGP 797.7 million collected one year previously. The quarter’s delinquency rate stood at 7.2% for the quarter compared to 4.4% in Q2 2022.

Cancellations

Cancellations stood at EGP 366.5 million for H1 2023، down significantly from EGP 1،176.7 million in H1 2022، due to the current economic situation. As a percentage of Madinet Masr’s gross contracted sales، cancellations booked 6.9% during H1 2023، down from a rate of 34.3% recorded in H1 2022. The cancellation rate is currently below the typical rate of 10-15%.

In Q2 2023، cancellations booked EGP 252.6 million، down 38.6% y-o-y from the EGP 411.6 million booked Q2 2022. Cancellations recorded 7.2% as a percentage of gross contracted sales in Q2 2022، down significantly y-o-y from the 22.4% booked in Q2 2022.

Deliveries

The Company delivered 479 units across its developments during H1 2023، down 42.4% y-o-y from the 832 deliveries recorded for H1 2022، due to a higher inventory of ready-to-move in units 2022. In the first half of the year، Madinet Masr completed 411 handovers at Sarai (H1 2022: 459)، 65 handovers at Taj City (H1 2022: 359) and 3 handovers at Nasr Gardens (H1 2022: 14)، a subsidized housing project.

Madinet Masr recorded 203 deliveries in Q2 2023، down by 56.9% from the 471 units recorded for Q2 2022. The Company delivered 31 units at Taj City during the quarter (Q2 2022: 183)، 172 units at Sarai (Q2 2022: 285) and no units at Nasr Gardens (Q2 2022: 3).
Madinet Masr deployed construction and infrastructure CAPEX of EGP 925.5 million during H1 2023 compared to EGP 798.9 million in H1 2022. The Company’s construction and infrastructure investments at Taj City amounted to EGP 545.7 million in H1 2023، against EGP 273.3 million for H1 2022. At Sarai، Madinet Masr recorded a construction and infrastructure CAPEX spend of EGP 304.9 million for H1 2023، against EGP 476.3 million for H1 2022. Construction and infrastructure CAPEX at other projects booked EGP 74.9 million for H1 2023، an increase from the EGP 49.3 million recorded one year previously. The overall change in CAPEX for H1 2023 comes following Madinet Masr’s launch of Rai and Elan projects in Sarai، the third phase of Club Side in Taj City، and the launch of Zahw in Assiut.

CAPEX

Madinet Masr made construction and infrastructure CAPEX outlays of EGP 413.4 million for Q2 2023، nearly at par with the EGP 417.8 million booked in Q2 2022. CAPEX spending recorded EGP 284.8 million at Taj City (Q2 2022: EGP 116.3 million)، EGP 78.6 million at Sarai (Q2 2022: EGP 263.9 million)، and EGP 50.0 million at other projects (Q2 2022: EGP 37.7 million).

Land Bank

Madinet Masr held a land bank measuring 9.6 million sqm at the close of H1 2023. The Company’s primary land bank is strategically located in Greater Cairo (Taj City and Sarai) and is owned in freehold، imparting significant competitive advantages as Madinet Masr is not bound by any specific development timelines outlined by state authorities and is legally entitled to parcel and sell plots of undeveloped land. As at 30 June 2023، 37.9% of Madinet Masr’s land bank was held at Taj City، 57.5% at Sarai and 4.6% at Zahw Assiut.

Nearly 58.7% of Taj City’s land area was under development at the close of H1 2023، with unlaunched residential projects and unlaunched nonresidential projects accounting for 18.7% and 22.6%، respectively. At Sarai، approximately 42.0% of the total land area was under development in H1 2023، with unlaunched residential projects and unlaunched nonresidential projects accounting for 43.3% and 14.7%، respectively.

The Company holds a new land bank of more than 437 thousand sqm in the Assiut region of Upper Egypt. As of H1 2023، Madinet Masr’s land bank in Assiut was under development، marking the Company’s geographical expansion beyond the Greater Cairo area.
The Company booked revenues of EGP 2،199.6 million in H1 2023، up by 22.8% y-o-y from a top line of EGP 1،790.7 million in H1 2022. Revenue growth for the six-month period was primarily driven by strong gross contracted sales value.

Deliveries generated EGP 686.3 million in revenue during H1 2023، down 45.9% y-o-y، while new sales generated EGP 1،274.0 million in revenue during the first half of the year، up by 56.5% y-o-y. Meanwhile، revenue from unit deliveries contributed 35.0% of the Company’s gross H1 2023 sales revenue of EGP 1،960.3 million before cancellations، land sale، installment interest and rental revenue. Revenue from new sales accounted for 65.0% of the Company’s gross top line for the six-month period. At the close of H1 2023، Madinet Masr had an unrecognized revenue backlog of EGP 14،744.8 million، calculated at the nominal price of undelivered sales.

Madinet Masr recorded revenue of EGP 1،184.4 million for Q2 2023، up by 21.8% y-o-y. Delivery revenue represented 26.7% of the Company’s gross top line during Q2 2023، while revenue from unit sales contributed 73.3% for the quarter.

Gross Profit

Gross profit recorded EGP 1،379.6 million for H1 2023، an increase of 152.1% y-o-y against EGP 547.3 million one year previously. Healthy growth in gross profit was driven by the Company’s strong top-line expansion for the six-month period. Madinet Masr booked a gross profit margin of 62.7% in H1 2023، against 30.6% in H1 2022. The expansion in the gross profit margin (GPM) during the period was achieved due to the increase in revenue from new sales with higher margins as compared to revenue from unit deliveries with lower margins.

Madinet Masr booked a gross profit of EGP 799.7 million for Q2 2023، up by 189.9% y-o-y. The Company’s GPM registered 67.5% for the quarter، up from the 28.4% booked in 2Q 2022.

Sales، General & Administrative Expense

Sales، general & administrative (SG&A) expenses came in at EGP 560.6 million for H1 2023، expanding 106.2% y-o-y from the outlay of EGP 271.9 million recorded for H1 2022. SG&A expenses rose on the back of media campaigns production and activation. As percentage of revenues، SG&A expense recorded 25.5% for H1 2023، up from 15.2% one year previously.

SG&A expenses recorded EGP 396.7 million for Q2 2023، up by 143.2% y-o-y. SG&A expenses booked 33.5% as a percentage of revenues in Q2 2023، up from the figure of 16.8% booked for Q2 2022.

Interest Expense

Interest expense booked EGP 153.0 million in H1 2023، up from EGP 147.3 million for H1 2022. On a quarterly basis، interest expense recorded EGP 82.2 million in Q2 2023، up from EGP 74.6 million in the same quarter last year. The increase in Madinet Masr’s interest expense reflects the increase in interest rates.
Madinet Masr reported an EBITDA of EGP 873.1 million for H1 2023، increasing 116.1% y-o-y from EGP 404.0 million in H1 2022. The associated EBITDA margin was 39.7% in H1 2023 compared to 22.6% one year previously due to the increase in the share of new sales with higher profit margins in the Company’s revenue mix for H1 2023.

EBITDA

Madinet Masr reported an EBITDA of EGP 873.1 million for H1 2023، increasing 116.1% y-o-y from EGP 404.0 million in H1 2022. The associated EBITDA margin was 39.7% in H1 2023 compared to 22.6% one year previously due to the increase in the share of new sales with higher profit margins in the Company’s revenue mix for H1 2023.

In Q2 2023، Madinet Masr booked an EBITDA of EGP 429.3 million، up by 122.4% y-o-y، yielding a margin of 36.2% for the quarter against 19.9% in Q2 2022.

Net Profit

Net profit reached EGP 584.7 million for H1 2023، growing a significant 146.8% y-o-y compared to EGP 236.9 million in H1 2022. Bottom-line growth for the period reflects increases in gross profit، operating cost and income tax as well as financing revenue. The net profit margin (NPM) recorded 26.6% for H1 2023، against 13.2% in H1 2022. The increase in the Company’s NPM was supported by an increase in gross profit margin for the quarter.
Madinet Masr recorded a net profit of EGP 280.3 million for Q2 2023، up by 140.2% y-o-y. The Company’s NPM booked 23.7% for the quarter، up from 12.0% in Q2 2022.

Balance Sheet

Cash & Cash Equivalents
On the balance sheet front، Madinet Masr held cash and cash equivalents of EGP 1،260.7 million excluding customer maintenance deposits as at 30 June 2023، down 31.4% from EGP 1،836.8 million at the close of 2022، primarily due to the repayment of a syndicated loan.

Debt

As at 30 June 2023، Madinet Masr had outstanding debt of EGP 2،256.5 million، down 30.1% from the of EGP 3،226.4 million booked at year-end 2022، due to the full repayment of a syndicated loan. The Company’s debt/equity ratio stood at 43.9% as at 30 June 2023، a decrease from the level of 66.2% posted at the close of 2022. Net debt came in at EGP 995.8 million as at 30 June 2023، down from EGP 1،389.6 million at the close of 2022. Madinet Masr recorded a net debt/EBITDA ratio of 0.6x as at 30 June 2023، down from 1.7x as at 31 December 2022. The Company’s strategy is to optimize efficient utilization of borrowing to support growth and manage financial risk.

Notes Receivable

Madinet Masr held EGP 4،371.3 million in notes receivable at the close of H1 2023، of which EGP 1،750.3 million were short-term receivables، EGP 2،316.4 million long-term receivables and EGP 304.6 million were due from customers. The Company closed an EGP 805 million securitization transaction during the first quarter of the year، bringing its cumulative gross securitized receivables to EGP 1،567.9 million as of 30 June 2023. Receivables to net debt stood at 4.4x by the end of H1 2023، up from the 2.8x recorded at year-end 2022.

PP&E

PP&E، fixed assets under construction، and property investments booked EGP 61.0 million at the close of H1 2023، up from the EGP 57.0 million booked at the close of 2022.

Recent corporate development

In January 2023، Madinet Masr introduced the latest investment opportunity in real estate known as “SAFE” (Secure Assets for Fixed Earnings). SAFE provides a new method to invest in real estate through “fractional property ownership” with attractive prices. The first project to implement this concept is The Hoft، a hybrid property in Taj City by subsidiary company Minka.
In February 2023، Madinet Masr signed a Memorandum of Understanding (MOU) with CONSTEC Construction and Design، a leading Egyptian joint stock company specializing in construction. The agreement will see CONSTEC carry out construction work worth more than EGP 500 million for The Arena Mall and Cavana located in Sarai.

In March 2023، Madinet Masr successfully closed an EGP 805.5 million securitized bond issuance with EFG Hermes’ investment banking division. The transaction is part of a three-year EGP 3.0 billion securitization program which kicked off in early 2022 with an EGP 300 million bond sale.

March 2023، Madinet Masr launched the second phase of Club Side in Taj City، recording EGP 1 billion in sales. With a total built-up area of 131،474 sqm، Club Side comprises five phases: four residential phases in addition to a sports club. The total investments for the two phases launched in Club Side are estimated at EGP 3.6 billion.

In March 2023، Madinet Masr launched the first phase of Rai in Sarai. Rai offers a diverse range of unit types and the first phase introduced S-villas ranging in size from 212-239 sqm and 160 sqm townhouses.

In March 2023، the Company rebranded from Madinet Nasr for Housing & Development to Madinet Masr، in line with its redefined growth-driven strategy to expand national and regionally. The new name represents the heritage، excellence and stability that have defined the Company’s past and will shape the next era of its growth.

In June 2023، Madinet Masr initiated its nationwide expansion strategy with the launch of Zahw in West Assiut. Zahw has a total area of 104 acres and encompasses more than 1،250 residential units. The first phase included 297 units of varying sized on a total built-up area of 63،000 sqm.

In June 2023، the Company launched the first phase of Elan، its latest project in Sarai. Elan features over 2،800 diverse units including apartments، penthouses، lofts and duplexes with a total built-up area of 347،043 sqm.