Kingdom Hotels sees 60% profit fall

Saudi billionaire Prince Alwaleed bin Talal owned international hotel and resort property company reports sharp fall in net profits in 2008.

Kingdom Hotel Investments (KHI), the Dubai-based international hotel and resort property company, reported a 60 per cent decrease in net profits last year, according to its preliminary results released today. KHI booked a net profit of US$17.1 million (Dh62.8m), compared with $42.3m a year earlier. "The main reason the net profits last year showed such a sharp downturn is because we took decisive early action to conserve cash, including the cancellation of four early-stage projects and aggressive restructuring and management of the group's cost base," said Sarmad Zok, the chief executive of KHI. Mr Zok said the company's net profits, excluding recurring items, grew by 34 per cent last year to $43.1m. "This means that the company is still very profitable and will continue to be a worthwhile investment for stockholders in the future," Mr Zok said. KHI wrote off or made provisions for $26.4m of investments and capitalised expenses related to costs of projects that had been cancelled or put on hold. They included projects in Langkawi in Malaysia, Da Nang in Vietnam, Phang Nga in Thailand and Kampala in Uganda. "The conditions of the market have now changed and the risks in these countries are now much higher than before," Mr Zok said. "That's why we decided to cancel these projects." He said the company's strategy involved completing projects such as the Four Seasons in Beirut, which would be finished in the latter half of this year. "We are no longer trying to start a new project every month; rather just paying close attention to the projects we have and trying to cut down costs. "Our prudent approach to balance-sheet management means the group is cash-rich and our commitment pipeline is fully funded. Looking ahead, KHI is well placed to weather current markets and take advantage of opportunities as and when conditions begin to improve." The report said KHI's developments and commitments had been fully funded. "Discretionary capital expenditures at all properties have been minimised. KHI will draw on new loan commitments to fund existing developments and selectively add debt where it sees recapitalisation opportunities and access to credit." The report said KHI management would continue to steer clear of acquisitions, given the credit crunch and global liquidity problems. "KHI does not foresee any resumption of its acquisition activities until the second half of the year at the earliest, but will continue to take advantage of portfolio rationalisation opportunities." In January, the holding company laid off 17 employees, or 25 per cent of its workforce in the Middle East. "We are also looking at cutting down the number of staff we have in our hotels worldwide," Mr Zok said. "However, currently we don't know how many jobs will be lost because it's also going to be up to the hotel's management companies." Prince Alwaleed bin Talal, the Saudi billionaire and member of the royal family, is the founder and chairman of KHI. The company has 34 hotels, with 23 in operation and another six under development. [e-mail]